HB2046 - 511R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 8-142.01, Arizona Revised Statutes, is amended to read:

START_STATUTE8-142.01. Adoption subsidy program; hospital reimbursement

A. Notwithstanding section 8‑144, subsection B, for inpatient hospital admissions and outpatient hospital services on or after March 1, 1993, the department shall reimburse a hospital according to the rates established by the Arizona health care cost containment system administration pursuant to section 36‑2903.01, subsection G.

B. The department shall use the Arizona health care cost containment system administration rates as identified in subsection A of this section for any child enrolled in the adoption subsidy program. This requirement shall not be construed to expand the liability of the adoption subsidy program beyond eligible preexisting conditions on an adoption subsidy agreement entered into between the department and the adoptive parent.

C. A hospital bill is considered received for purposes of subsection E of this section on initial receipt of the legible, error‑free claim form by the department if the claim includes the following error‑free documentation in legible form:

1. An admission face sheet.

2. An itemized statement.

3. An admission history and physical.

4. A discharge summary or an interim summary if the claim is split.

5. An emergency record, if admission was through the emergency room.

6. Operative reports, if applicable.

7. A labor and delivery room report, if applicable.

D. The department shall require that the hospital pursue other third‑party payors before submitting a claim to the department. Payment received by a hospital from the department pursuant to this section is considered payment by the department of the department's liability for the hospital bill. A hospital may collect any unpaid portion of its bill from other third-party payors or in situations covered by title 33, chapter 7, article 3.

E. For inpatient hospital admissions and outpatient hospital services rendered on and after October 1, 1997, if the department receives the claim directly from the hospital for services rendered, the department shall pay a hospital's rate established according to this section subject to the following:

1. If the hospital's bill is paid within thirty days of the date the bill was received, the department shall pay ninety‑nine per cent of the rate.

2. If the hospital's bill is paid after thirty days but within sixty days of the date the bill was received, the department shall pay one hundred per cent of the rate.

3. If the hospital's bill is paid any time after sixty days of the date the bill was received, the department shall pay one hundred per cent of the rate plus a fee of one per cent per month for each month or portion of a month following the sixtieth day of receipt of the bill until the date of payment.

F. For medical services other than those for which a rate has been established pursuant to section 36‑2903.01, subsection G, the department shall pay according to the Arizona health care cost containment system capped fee‑for‑service schedule adopted pursuant to section 36‑2904, subsection K J.

G. For any hospital or medical claims not covered under subsection A or F of this section, the department shall establish and adopt a schedule setting out maximum allowable fees that the department deems reasonable for such services after appropriate study and analysis of usual and customary fees charged by providers. END_STATUTE

Sec. 2. Section 8-512, Arizona Revised Statutes, is amended to read:

START_STATUTE8-512. Comprehensive medical and dental care; guidelines

A. The department shall provide comprehensive medical and dental care, as prescribed by rules of the department, for each child who is:

1. Placed in a foster home.

2. In the custody of the department and placed with a relative.

3. In the custody of the department and placed in a certified adoptive home before the entry of the final order of adoption.

4. In the custody of the department and in an independent living program as provided in section 8‑521.

5. In the custody of a probation department and placed in foster care. The department shall not provide this care if the cost exceeds funds currently appropriated and available for that purpose.

B. The care may include, but is not limited to:

1. A program of regular health examinations and immunizations, including as minimums:

(a) Vaccinations to prevent mumps, rubella, smallpox and polio.

(b) Tests for anemia, coccidioidomycosis and tuberculosis.

(d) Regular examinations for general health, hearing and vision, including providing corrective devices when needed.

2. Inpatient and outpatient hospital care.

3. Necessary services of physicians, surgeons, psychologists and psychiatrists.

4. Dental care consisting of at least oral examinations, including diagnostic radiographs, oral prophylaxis and topical fluoride applications, restoration of permanent and primary teeth, pulp therapy, extraction when necessary, fixed space maintainers where needed and other services for relief of pain and infection.

5. Drug prescription service.

C. The facilities of any hospital or other institution within the state, public or private, may be employed by the foster parent, relative, certified adoptive parent, agency or division having responsibility for the care of the child.

D. For inpatient hospital admissions and outpatient hospital services on or after March 1, 1993, the department shall reimburse a hospital according to the rates established by the Arizona health care cost containment system administration pursuant to section 36‑2903.01, subsection G.

E. The department shall use the Arizona health care cost containment system administration rates as identified in subsection D of this section for any child eligible for services under this section.

F. A hospital bill is considered received for purposes of subsection H of this section on initial receipt of the legible, error‑free claim form by the department if the claim includes the following error‑free documentation in legible form:

1. An admission face sheet.

2. An itemized statement.

3. An admission history and physical.

4. A discharge summary or an interim summary if the claim is split.

5. An emergency record, if admission was through the emergency room.

6. Operative reports, if applicable.

7. A labor and delivery room report, if applicable.

G. The department shall require that the hospital pursue other third‑party payors before submitting a claim to the department. Payment received by a hospital from the department is considered payment by the department of the department's liability for the hospital bill. A hospital may collect any unpaid portion of its bill from other third-party payors or in situations covered by title 33, chapter 7, article 3.

H. For inpatient hospital admissions and outpatient hospital services rendered on and after October 1, 1997, the department shall pay a hospital's rate established according to this section subject to the following:

1. If the hospital's bill is paid within thirty days of the date the bill was received, the department shall pay ninety‑nine per cent of the rate.

2. If the hospital's bill is paid after thirty days but within sixty days of the date the bill was received, the department shall pay one hundred per cent of the rate.

I. For medical services other than those for which a rate has been established pursuant to section 36‑2903.01, subsection G, the department shall pay according to the Arizona health care cost containment system capped fee‑for‑service schedule adopted pursuant to section 36‑2904, subsection K J.

J. For any hospital or medical claims not covered under subsection D or I of this section, the department shall establish and adopt a schedule setting out maximum allowable fees that the department deems reasonable for such services after appropriate study and analysis of usual and customary fees charged by providers. The department shall not pay to any plan or intermediary that portion of the cost of any service provided that exceeds allowable charges prescribed by the department pursuant to this subsection.

K. The department shall not pay claims for services pursuant to this section that are submitted more than one hundred eighty days after the date of the service for which the payment is claimed.

L. The department may provide for payment through an insurance plan, hospital service plan, medical service plan, or any other health service plan authorized to do business in this state, fiscal intermediary or a combination of such plans or methods. The state shall not be liable for and the department shall not pay to any plan or intermediary any portion of the cost of comprehensive medical and dental care in excess of funds appropriated and available for such purpose at the time the plan or intermediary incurs the expense for such care.

M. The total amount of state monies that may be spent in any fiscal year by the department for comprehensive medical and dental care shall not exceed the amount appropriated or authorized by section 35‑173 for that purpose. This section shall not be construed to impose a duty on an officer, agent or employee of this state to discharge a responsibility or to create any right in a person or group if the discharge or right would require an expenditure of state monies in excess of the expenditure authorized by legislative appropriation for that specific purpose. END_STATUTE

Sec. 3. Section 11-292, Arizona Revised Statutes, is amended to read:

START_STATUTE11-292. Medical care; definition

A. The board of supervisors, subject to the applicable provisions of title 42, chapter 17, articles 2 and 3, shall include in its annual budget an amount equal to fifty per cent of the amount budgeted by the county board of supervisors or the amount expended, whichever is less, for the hospitalization and medical care of the indigent sick pursuant to this article for fiscal year 1980‑1981, except for Yuma and La Paz counties. The contribution amounts of those counties shall be equal to the amount Yuma county would have made pursuant to this subsection if a division had not occurred apportioned between the counties. The office of the auditor general shall determine the amount Yuma county would otherwise have included if a division had not occurred and shall then determine the contribution amounts of Yuma and La Paz counties based on the proportionate share of the estimated population in these counties as of July 1, 1982.

B. For fiscal year 1994‑1995, and for each fiscal year thereafter, the state treasurer shall withhold an amount sufficient to meet the county portion of the nonfederal costs of providing long‑term care system services, pursuant to title 36, chapter 29, article 2, excluding services to the developmentally disabled, from monies otherwise payable to the county under section 42‑5029, subsection D, paragraph 2. This amount and the state portion of the nonfederal costs shall be specified in the annual appropriation for the maintenance and operation of the Arizona health care cost containment system. For fiscal years 1994‑1995, 1995‑1996 and 1996‑1997, monies shall be withheld from each county based on the following percentages derived from a state auditor general's certified audit of fiscal year 1987‑1988 county long‑term care and home health care expenditures, except that amounts withheld shall be adjusted to reflect amounts paid by counties pursuant to section 36‑2952:

1. Apache: 0.22%

2. Cochise: 2.49%

3. Coconino: 0.66%

4. Gila: 2.56%

5. Graham: 0.64%

6. Greenlee: 0.34%

7. La Paz: 0.34%

8. Maricopa: 56.55%

9. Mohave: 2.73%

10. Navajo: 0.91%

11. Pima: 20.55%

12. Pinal: 5.09%

13. Santa Cruz: 1.05%

14. Yavapai: 3.12%

15. Yuma: 2.75%

C. In each fiscal year, of the total amount that is specified in the annual appropriation as the nonfederal portion of the cost of providing long‑term care services and that portion of the phased-down medicare prescription drug state contribution attributable to the Arizona long‑term care system, excluding services and phased-down medicare prescription drug state contribution costs associated with the developmentally disabled, and that represents an increase from the amount that was specified in the annual appropriation for the prior fiscal year, the state shall pay fifty per cent of the increase. The remaining nonfederal portion of the costs shall be apportioned among the counties according to the proportion that each county's net nonfederal expenditures for long‑term care services, excluding services to the developmentally disabled, bears to the total nonfederal expenditure for all counties two fiscal years earlier, with the following adjustments in the following order:

1. If the resulting net county contribution when expressed as an imputed property tax rate per one hundred dollars of net assessed value exceeds ninety cents, the county's contribution shall be reduced so that the imputed property tax rate equals ninety cents and the difference shall be paid by the state.

2. Any county with a native American population that represents at least twenty per cent of the county's total population according to the most recent United States decennial census shall contribute an amount equal to the prior fiscal year's contribution plus fifty per cent of the difference between the prior year's contribution were it calculated using the percentage in subsection B of this section and the current year's contribution as if its share of the total nonfederal portion of the long‑term care costs had been calculated using the percentage prescribed in subsection B of this section and the state shall pay any difference from the amount otherwise required by this subsection.

3. If, after making the adjustments in this subsection, a county would contribute more than if its contribution were calculated using the percentage prescribed in subsection B of this section multiplied by the total nonfederal costs of long‑term care services, excluding services to the developmentally disabled, the county's contribution shall be reduced to the sum of its prior year's contribution plus fifty per cent of the difference between the prior year's contribution were it calculated using the percentage in subsection B of this section and the current year's contribution as if its share of the total nonfederal portion of long‑term care costs had been calculated using the percentage prescribed in subsection B of this section and the state shall pay any difference from the amount otherwise required by this subsection.

4. After making all of the adjustments in this subsection, a statewide per capita county contribution shall be calculated by summing the contributions for all counties and then dividing the resulting total by the total state population. If an individual county's contribution when expressed as a per capita contribution exceeds the statewide per capita county contribution, the county's contribution shall be reduced so that the county's contribution equals the statewide per capita contribution and the difference shall be paid by the state. For the purposes of this paragraph, "population" means the population estimate approved by the director of the department of economic security office of employment and population statistics for the most recent fiscal year.

D. The director of the Arizona health care cost containment system administration shall notify each county of the amount determined pursuant to subsection A of this section to be included in its annual budget no later than May 1 of each year.

E. If a county does not provide funding as specified in subsection A of this section, the state treasurer shall subtract the amount owed to the Arizona health care cost containment system fund by the county from any payments required to be made by the state treasurer to that county pursuant to section 42‑5029, subsection D, paragraph 2, plus interest on that amount pursuant to section 44‑1201 retroactive to the first day the funding was due. If the monies the state treasurer withholds are insufficient to meet that county's funding requirement as specified in subsection A of this section, the state treasurer shall withhold from any other monies payable to that county from whatever state funding source is available an amount necessary to fulfill that county's requirement. The state treasurer shall not withhold distributions from the highway user revenue fund pursuant to title 28, chapter 18, article 2.

F. Each month payment of an amount equal to one‑twelfth of the total amount determined pursuant to subsection A of this section shall be made to the state treasurer. Payment of this amount shall be made to the state treasurer on or before the fifth day of each month. Upon request from the director of the Arizona health care cost containment system administration, the state treasurer shall require that up to three months' payments be made in advance, if necessary.

G. The state treasurer shall deposit the amounts paid pursuant to subsection F of this section and amounts withheld pursuant to subsection E of this section in the Arizona health care cost containment system fund established by section 36‑2913.

H. If payments made pursuant to subsection F of this section exceed the amount required to meet the costs incurred by the Arizona health care cost containment system for the hospitalization and medical care of a person who is defined as an eligible person pursuant to section 36‑2901, paragraph 6, subdivision (a), the director of the Arizona health care cost containment system administration may instruct the state treasurer either to reduce remaining payments to be paid pursuant to this section by a specified amount or to provide to the counties specified amounts from the Arizona health care cost containment system fund.

I. The amount of the county contribution to the Arizona health care cost containment system fund established by section 36‑2913 shall not exceed thirty‑three per cent of the amount that the system administration expended in the county for fiscal year 1983‑1984. For the purposes of this subsection, system administration expenditures in a county for fiscal year 1983‑1984 are the total capitation and fee for service amounts paid by the system administration to providers in a county before February 1, 1986 for services rendered during fiscal year 1983‑1984 to persons eligible for the system.

J. The state treasurer shall deposit the monies withheld from the counties and contributed by the state pursuant to subsection B of this section in the long‑term care system fund established by section 36‑2913, in twelve equal monthly installments. The monthly installments shall be deposited in the fund by the state treasurer by the fourth working day of each month.

K. By July 1 or within sixty days after enactment of the annual appropriation for the maintenance and operation of the Arizona health care cost containment system, whichever is later, and after consulting with the joint legislative budget committee and the governor's office of strategic planning and budgeting, the state treasurer shall notify each county of the amount to be withheld pursuant to subsection B of this section.

L. If the monies deposited in the long‑term care system fund pursuant to subsection J of this section are insufficient to meet the funding requirement as specified in the annual appropriation for the maintenance and operation of the Arizona health care cost containment system pursuant to subsection B of this section, the state treasurer shall withhold from any other monies payable to that county from any available state funding source, other than the highway user revenue fund, the amount required to fulfill fifty per cent of the funding requirement and shall deposit the monies in the long‑term care system fund. The state shall pay the remaining fifty per cent of the funding requirement.

M. If any monies in the funds for the purpose of title 36, chapter 29, article 2 remain unexpended at the end of the fiscal year, the director of the Arizona health care cost containment system administration shall specify to the state treasurer the amount to be withdrawn from the long‑term care system fund. Of the amount specified, the state treasurer shall distribute fifty per cent to the counties pursuant to subsection B or C of this section. The remaining fifty per cent shall be distributed to the state.

N. The board of supervisors of a county that is a program contractor pursuant to section 36‑2940 shall include in its annual budget, subject to title 42, chapter 17, articles 2 and 3, monies received from the Arizona health care cost containment system fund and long‑term care system fund for the purposes of title 36, chapter 29, article 2.

O. Notwithstanding any law to the contrary, beginning in fiscal year 2005‑2006 and in each fiscal year thereafter, the state treasurer shall withhold a total of two million three hundred ninety-five thousand four hundred dollars for the county contribution for the administrative costs of implementing sections section 36‑2901.01 and 36‑2901.04 beginning with the second monthly distribution of transaction privilege tax revenues otherwise distributable after subtracting any amounts withheld for the county long‑term care contribution. Beginning in fiscal year 2006‑2007, the state treasurer shall adjust the amount withheld according to the annual changes in the GDP price deflator and as calculated by the joint legislative budget committee staff. Beginning in fiscal year 2006‑2007, the joint legislative budget committee shall calculate an additional adjustment of the allocation required by this subsection based on changes in the population as reported by the department of economic security office of employment and population statistics. For the purposes of this subsection, "GDP price deflator" has the same meaning prescribed in section 41‑563. Each county's annual contribution is as follows:

1. Apache, 3.296 per cent.

2. Cochise, 6.148 per cent.

3. Coconino, 6.065 per cent.

4. Gila, 2.491 per cent.

5. Graham, 1.7710 per cent.

6. Greenlee, 0.455 per cent.

7. La Paz, 0.9430 per cent.

8. Mohave, 7.079 per cent.

9. Navajo, 4.640 per cent.

10. Pima, 42.168 per cent.

11. Pinal, 8.251 per cent.

12. Santa Cruz, 1.950 per cent.

13. Yavapai, 7.794 per cent.

14. Yuma, 6.949 per cent.

P. The state treasurer shall deposit the amounts paid pursuant to subsection O of this section in the budget neutrality compliance fund established by section 36‑2928.

Q. Beginning in fiscal year 2006‑2007 for a county that is subject to section 12‑269, the county's contributions pursuant to this section shall be reduced by the amount of state aid for probation services that the county would have received in the first fiscal year in which the county does not receive state aid for probation services. Any increase in the county's contributions in subsequent years shall be reduced according to its proportionate share of the base contribution. County contributions shall be reduced in the following priority:

1. First as applied to the contribution provided for in subsection O of this section.

2. Second as applied to the contribution provided for in subsection A of this section or any other contribution for acute care or for the provision of hospitalization and medical care that would otherwise be required.

3. Third as applied to the contribution provided for in subsection C of this section.

R. Beginning in fiscal year 2007-2008 for a county that is subject to section 22‑117, subsection D, the county's contributions pursuant to this section shall be reduced by the amount of the state reimbursement that the county would have received in fiscal year 2007‑2008 for the salaries of justices of the peace pursuant to section 22‑217 22-117, subsection B. Any increase in the county's contributions in subsequent years shall be reduced according to its proportionate share of the base contribution. County contributions shall be reduced in the following priority:

1. First as applied to the contribution provided for in subsection O of this section.

S. For the purposes of this section, "net assessed value" includes the values used to determine voluntary contributions collected pursuant to title 9, chapter 4, article 3 and title 48, chapter 1, article 8. END_STATUTE

Sec. 4. Section 12-262, Arizona Revised Statutes, is amended to read:

START_STATUTE12-262. Submission of plan; use of funds; report

A. The presiding judge of the superior court in each county desiring to improve, maintain or expand juvenile probation services, or to achieve or maintain the average adult probation case supervision requirement prescribed in section 12‑251, may prepare a plan in accordance with guidelines issued by the supreme court. The plan shall be submitted to the state supreme court. The supreme court guidelines shall require that the plan include:

1. That funds received under this article shall be used primarily for payment of salaries of probation officers supervising adults or juveniles on probation to the superior, justice or municipal court.

2. That the funds provided by the state for this purpose will be used to supplement county funds provided for probation services.

3. The proposed budget necessary to implement the plan, including the amount currently budgeted for that county's probation program.

B. If a county is subject to section 12‑269, the following apply:

1. Beginning in fiscal year 2006‑2007, the county's contribution to the hospitalization and medical care of the indigent sick, to the nonfederal portion of providing long-term care and for the administrative costs of implementing sections section 36‑2901.01 and 36‑2901.04 shall be reduced pursuant to section 11‑292, subsection Q.

2. The economic estimates commission shall increase the county's base expenditure limit beginning in the fiscal year that the county assumes funding responsibility pursuant to section 41‑563, subsection D.

C. The supreme court shall report to the joint legislative budget committee all amounts provided to any county pursuant to this article for adult probation services or juvenile probation services. END_STATUTE

Sec. 5. Delayed repeal

Section 20-2330, Arizona Revised Statutes, is repealed from and after December 31, 2013.

Sec. 6. Section 22-117, Arizona Revised Statutes, is amended to read:

START_STATUTE22-117. Payment of compensation and expenses

A. Justices of the peace shall be allowed by the board of supervisors, as a county charge, office rent, stationery, telephone and lights.

B. In a county with a population of less than one million five hundred thousand persons, the state shall pay 19.25 per cent of the compensation and employee related expenditures of a justice of the peace, and the county shall pay 80.75 per cent of the compensation and employee related expenditures of a justice of the peace, except that the county shall pay the full amount of the employer contribution of the state retirement system or plan or any county health plan.

C. If a county is subject to subsection B of this section, the state treasurer shall remit the compensation and employee related expenditures payable by the state to the county treasurer, and the county shall disburse the funds to the justice of the peace.

D. In a county with a population of one million five hundred thousand persons or more, the county shall pay one hundred per cent of the compensation and employee related expenditures of a justice of the peace.

E. If a county is subject to subsection D of this section, the following apply:

1. Beginning in fiscal year 2007‑2008, the county's contribution to the hospitalization and medical care of the indigent sick and for the administrative costs of implementing sections section 36‑2901.01 and 36‑2901.04 shall be reduced pursuant to section 11‑292, subsection R, in an amount that is equal to the difference between the total costs that the county paid pursuant to subsection D of this section and the amount that the county would have paid if the county were subject to subsection B of this section.

2. Pursuant to section 41‑563, subsection D and beginning in fiscal year 2007‑2008, the economic estimates commission shall increase the county's base expenditure limit in an amount that is equal to the difference between the total costs that the county paid pursuant to subsection D of this section and the amount that the county would have paid if the county were subject to subsection B of this section. END_STATUTE

Sec. 7. Section 36-774, Arizona Revised Statutes, is amended to read:

START_STATUTE36-774. Medically needy account; definition

A. Seventy cents of each dollar in the tobacco tax and health care fund shall be deposited in the medically needy account to provide health care services to persons who are determined to be eligible for services pursuant to section 36‑2901.01 or 36‑2901.04 as provided by the Arizona health care cost containment system pursuant to chapter 29, article 1 of this title or any expansion of that program or any substantially equivalent or expanded successor program established by the legislature providing health care services to persons who cannot afford those services and for whom there would otherwise be no coverage. These services shall include preventive care and the treatment of catastrophic illness or injury, as provided by the Arizona health care cost containment system.

B. The Arizona health care cost containment system administration or any successor shall administer the account.

C. Monies that are deposited in the medically needy account:

1. Shall only be used to supplement monies that are appropriated by the legislature for the purpose of providing levels of service that are established pursuant to chapter 29, article 1 of this title to eligible persons as defined in section 36‑2901 or any expansion of those levels of service, or for any successor program established by the legislature providing levels of service that are substantially equivalent to, or expanding, those provided pursuant to chapter 29, article 1 of this title to eligible persons.

2. Shall not be used to supplant monies that are appropriated by the legislature for the purpose of providing levels of service established pursuant to chapter 29, article 1 of this title.

D. For the purposes of this section, "levels of service" means the provider payment methodology, eligibility criteria and covered services established pursuant to chapter 29, article 1 of this title in effect on July 1, 1993.END_STATUTE

Sec. 8. Section 36-2901, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2901. Definitions

In this article, unless the context otherwise requires:

1. "Administration" means the Arizona health care cost containment system administration.

2. "Administrator" means the administrator of the Arizona health care cost containment system.

3. "Contractor" means a person or entity that has a prepaid capitated contract with the administration pursuant to section 36‑2904 to provide health care to members under this article either directly or through subcontracts with providers.

4. "Department" means the department of economic security.

5. "Director" means the director of the Arizona health care cost containment system administration.

6. "Eligible person" means any person who is:

(a) Any of the following:

(i) Defined as mandatorily or optionally eligible pursuant to title XIX of the social security act as authorized by the state plan.

(ii) Defined in title XIX of the social security act as an eligible pregnant woman with a family income that does not exceed one hundred fifty per cent of the federal poverty guidelines, as a child under the age of six years and whose family income does not exceed one hundred thirty‑three per cent of the federal poverty guidelines or as children who have not attained nineteen years of age and whose family income does not exceed one hundred per cent of the federal poverty guidelines.

(iii) Under twenty‑one years of age and who was in the custody of the department of economic security pursuant to title 8, chapter 5 or 10 when the person became eighteen years of age.

(iv) Defined as eligible pursuant to section 36‑2901.01.

(v) Defined as eligible pursuant to section 36‑2901.04.

(b) A full‑time officer or employee of this state or of a city, town or school district of this state or other person who is eligible for hospitalization and medical care under title 38, chapter 4, article 4.

(c) A full‑time officer or employee of any county in this state or other persons authorized by the county to participate in county medical care and hospitalization programs if the county in which such officer or employee is employed has authorized participation in the system by resolution of the county board of supervisors.

(d) An employee of a business within this state.

(e) A dependent of an officer or employee who is participating in the system.

(f) Not enrolled in the Arizona long‑term care system pursuant to article 2 of this chapter.

(g) Defined as eligible pursuant to section 1902(a)(10)(A)(ii)(XV) and (XVI) of title XIX of the social security act and who meets the income requirements of section 36‑2929.

7. "Graduate medical education" means a program, including an approved fellowship, that prepares a physician for the independent practice of medicine by providing didactic and clinical education in a medical discipline to a medical student who has completed a recognized undergraduate medical education program.

8. "Malice" means evil intent and outrageous, oppressive or intolerable conduct that creates a substantial risk of tremendous harm to others.

9. "Member" means an eligible person who enrolls in the system.

10. "Noncontracting provider" means a person who provides health care to members pursuant to this article but not pursuant to a subcontract with a contractor.

11. "Physician" means a person licensed pursuant to title 32, chapter 13 or 17.

12. "Prepaid capitated" means a mode of payment by which a health care contractor directly delivers health care services for the duration of a contract to a maximum specified number of members based on a fixed rate per member notwithstanding:

(a) The actual number of members who receive care from the contractor.

(b) The amount of health care services provided to any member.

13. "Primary care physician" means a physician who is a family practitioner, general practitioner, pediatrician, general internist, or obstetrician or gynecologist.

14. "Primary care practitioner" means a nurse practitioner certified pursuant to title 32, chapter 15 or a physician assistant certified pursuant to title 32, chapter 25. This paragraph does not expand the scope of practice for nurse practitioners as defined pursuant to title 32, chapter 15, or for physician assistants as defined pursuant to title 32, chapter 25.

15. "Section 1115 waiver" means the research and demonstration waiver granted by the United States department of health and human services.

16. "Special health care district" means a special health care district organized pursuant to title 48, chapter 31.

17. "State plan" has the same meaning prescribed in section 36‑2931.

18. "System" means the Arizona health care cost containment system established by this article. END_STATUTE

Sec. 9. Delayed repeal

Section 36-2901.04, Arizona Revised Statutes, is repealed from and after December 31, 2013.

Sec. 10. Section 36-2901.05, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2901.05. Breast and cervical cancer treatment; additional definition of eligibility

A. For the purposes of this article, beginning January 1, 2002, "eligible person" includes a person who meets all of the following requirements:

1. Has been screened for breast and cervical cancer by a provider or entity that is recognized by the well woman healthcheck program administered by the department of health services as part of its program under title XV of the public health service act and that operates consistently with well woman healthcheck program guidelines.

2. Needs treatment for breast or cervical cancer.

3. Has an income level that is at or below two hundred fifty per cent of the federal poverty guidelines as determined by the department of health services.

4. Is under sixty‑five years of age.

5. Is not otherwise covered under creditable coverage as defined in section 2701(c) of the public health services act (42 United States Code section 300gg(c)).

B. The administration shall limit the assistance it provides pursuant to this section to medically necessary services provided during the period that the person requires treatment for breast or cervical cancer as determined by the administration.

C. The administration shall use a simplified eligibility form that the applicant may mail to the administration. Once the administration receives a completed application, the administration shall expedite the eligibility determination and enrollment on a prospective basis. END_STATUTE

Sec. 11. Section 36-2903, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2903. Arizona health care cost containment system; administrator; powers and duties of director and administrator; exemption from attorney general representation; definition

A. The Arizona health care cost containment system is established consisting of contracts with contractors for the provision of hospitalization and medical care coverage to members. Except as specifically required by federal law and by section 36‑2909, The system is only responsible for providing care on or after the date that the person has been determined eligible for the system, and is only responsible for reimbursing the cost of care rendered on or after the date that the person was determined eligible for the system.

B. An agreement may be entered into with an independent contractor, subject to title 41, chapter 23, to serve as the statewide administrator of the system. The administrator administration has full operational responsibility, subject to supervision by the director, for the system, which may include any or all of the following:

1. Development of county‑by‑county implementation and operation plans for the system that include reasonable access to hospitalization and medical care services for members.

2. Contract administration and oversight of contractors, including certification instead of licensure for title XVIII and title XIX purposes.

3. Provision of technical assistance services to contractors and potential contractors.

4. Development of a complete system of accounts and controls for the system, including provisions designed to ensure that covered health and medical services provided through the system are not used unnecessarily or unreasonably, including but not limited to inpatient behavioral health services provided in a hospital. Periodically the administrator administration shall compare the scope, utilization rates, utilization control methods and unit prices of major health and medical services provided in this state in comparison with other states' health care services to identify any unnecessary or unreasonable utilization within the system. The administrator administration shall periodically assess the cost effectiveness and health implications of alternate approaches to the provision of covered health and medical services through the system in order to reduce unnecessary or unreasonable utilization.

5. Establishment of peer review and utilization review functions for all contractors, providers and noncontracting providers.

6. Assistance in the formation of medical care consortiums to provide covered health and medical services under the system for a county.

7. Development and management of a contractor payment system.

8. Establishment and management of a comprehensive system for assuring ensuring the quality of care delivered by the system.

9. Establishment and management of a system to prevent fraud by members, subcontracted providers of care, contractors and noncontracting providers.

10. Coordination of benefits provided under this article to any member. The administrator may require that contractors, providers and noncontracting providers are responsible for the coordination of benefits for services provided under this article. Requirements for coordination of benefits by noncontracting providers under this section are limited to coordination with standard health insurance and disability insurance policies and similar programs for health coverage.

11. Development of a health education and information program.

12. Development and management of an enrollment system.

13. Establishment and maintenance of a claims resolution procedure to ensure that ninety per cent of the clean claims shall be paid within thirty days of receipt and ninety‑nine per cent of the remaining clean claims shall be paid within ninety days of receipt. For the purposes of this paragraph, "clean claims" has the same meaning prescribed in section 36‑2904, subsection G F.

14. Establishment of standards for the coordination of medical care and patient transfers pursuant to section 36‑2909, subsection B.

15. Establishment of a system to implement medical child support requirements, as required by federal law. The administration may enter into an intergovernmental agreement with the department of economic security to implement this paragraph.

16. Establishment of an employee recognition fund.

17. Establishment of an eligibility process to determine whether a medicare low income subsidy is available to persons who want to apply for a subsidy as authorized by title XVIII.

C. If an agreement is not entered into with an independent contractor to serve as statewide administrator of the system pursuant to subsection B of this section, The director shall ensure that the operational responsibilities set forth in subsection B of this section are fulfilled by the administration and other contractors as necessary.

D. If the director determines that the administrator will fulfill some but not all of the responsibilities set forth in subsection B of this section, the director shall ensure that the remaining responsibilities are fulfilled by the administration and other contractors as necessary.

E. The administrator or any direct or indirect subsidiary of the administrator is not eligible to serve as a contractor.

F. Except for reinsurance obtained by contractors, the administrator administration shall coordinate benefits provided under this article to any eligible person who is covered by workers' compensation, disability insurance, a hospital and medical service corporation, a health care services organization, an accountable health plan or any other health or medical or disability insurance plan including coverage made available to persons defined as eligible by section 36‑2901, paragraph 6, subdivisions (b), (c), (d) and (e), or who receives payments for accident‑related injuries, so that any costs for hospitalization and medical care paid by the system are recovered from any other available third-party payors. The administrator administration may require that contractors and noncontracting providers are responsible for the coordination of benefits for services provided under this article. Requirements for coordination of benefits by noncontracting providers under this section are limited to coordination with standard health insurance and disability insurance policies and similar programs for health coverage. The system shall act as payor of last resort for persons eligible pursuant to section 36‑2901, paragraph 6, subdivision (a), section 36‑2974 or section 36‑2981, paragraph 6 unless specifically prohibited by federal law. By operation of law, eligible persons assign to the system and a county rights to all types of medical benefits to which the person is entitled, including first party medical benefits under automobile insurance policies based on the order of priorities established pursuant to section 36‑2915. The state has a right to subrogation against any other person or firm to enforce the assignment of medical benefits. The provisions of this subsection are controlling over the provisions of any insurance policy that provides benefits to an eligible person if the policy is inconsistent with the provisions of this subsection.

G. Notwithstanding subsection E of this section, the administrator administration may subcontract distinct administrative functions to one or more persons who may be contractors within the system.

H. The director shall require as a condition of a contract with any contractor, provider or subcontracted provider that all records relating to contract compliance are available for inspection by the administrator administration and the director subject to subsection I of this section and that such records be maintained by the contractor, provider or subcontracted provider for five years. The director shall also require that these records be made available by a contractor, provider or subcontracted provider on request of the secretary of the United States department of health and human services, or its successor agency.

I. Subject to existing law relating to privilege and protection, the director shall prescribe by rule the types of information that are confidential and circumstances under which such information may be used or released, including requirements for physician‑patient confidentiality. Notwithstanding any other provision of law, such rules shall be designed to provide for the exchange of necessary information among the counties, the administration and the department of economic security for the purposes of eligibility determination under this article. Notwithstanding any law to the contrary, a member's medical record shall be released without the member's consent in situations or suspected cases of fraud or abuse relating to the system to an officer of the state's certified Arizona health care cost containment system fraud control unit who has submitted a written request for the medical record.

J. The director shall prescribe rules that specify methods for:

1. The transition of members between system contractors and noncontracting providers.

2. The transfer of members and persons who have been determined eligible from hospitals that do not have contracts to care for such persons.

K. The director shall adopt rules that set forth procedures and standards for use by the system in requesting county long‑term care for members or persons determined eligible.

L. To the extent that services are furnished pursuant to this article, and unless otherwise required pursuant to this chapter, a contractor is not subject to title 20.

M. As a condition of the contract with any contractor, the director shall require contract terms as necessary in the judgment of the director to ensure adequate performance and compliance with all applicable federal laws by the contractor of the provisions of each contract executed pursuant to this chapter. Contract provisions required by the director shall include at a minimum the maintenance of deposits, performance bonds, financial reserves or other financial security. The director may waive requirements for the posting of bonds or security for contractors that have posted other security, equal to or greater than that required by the system, with a state agency for the performance of health service contracts if funds would be available from such security for the system on default by the contractor. The director may also adopt rules for the withholding or forfeiture of payments to be made to a contractor by the system for the failure of the contractor to comply with a provision of the contractor's contract with the system or with the adopted rules. The director may also require contract terms allowing the administration to operate a contractor directly under circumstances specified in the contract. The administration shall operate the contractor only as long as it is necessary to assure delivery of uninterrupted care to members enrolled with the contractor and accomplish the orderly transition of those members to other system contractors, or until the contractor reorganizes or otherwise corrects the contract performance failure. The administration shall not operate a contractor unless, before that action, the administration delivers notice to the contractor and provides an opportunity for a hearing in accordance with procedures established by the director. Notwithstanding the provisions of a contract, if the administration finds that the public health, safety or welfare requires emergency action, it may operate as the contractor on notice to the contractor and pending an administrative hearing, which it shall promptly institute.

N. The administration for the sole purpose of matters concerning and directly related to the Arizona health care cost containment system and the Arizona long‑term care system is exempt from section 41‑192.

O. Notwithstanding subsection F of this section, if the administration determines that according to federal guidelines it is more cost‑effective for a person defined as eligible under section 36‑2901, paragraph 6, subdivision (a) to be enrolled in a group health insurance plan in which the person is entitled to be enrolled, the administration may pay all of that person's premiums, deductibles, coinsurance and other cost sharing obligations for services covered under section 36‑2907. The person shall apply for enrollment in the group health insurance plan as a condition of eligibility under section 36‑2901, paragraph 6, subdivision (a).

P. The total amount of state monies that may be spent in any fiscal year by the administration for health care shall not exceed the amount appropriated or authorized by section 35‑173 for all health care purposes. This article does not impose a duty on an officer, agent or employee of this state to discharge a responsibility or to create any right in a person or group if the discharge or right would require an expenditure of state monies in excess of the expenditure authorized by legislative appropriation for that specific purpose.

Q. Notwithstanding section 36‑470, a contractor or program contractor may receive laboratory tests from a laboratory or hospital‑based laboratory for a system member enrolled with the contractor or program contractor subject to all of the following requirements:

1. The contractor or program contractor shall provide a written request to the laboratory in a format mutually agreed to by the laboratory and the requesting health plan or program contractor. The request shall include the member's name, the member's plan identification number, the specific test results that are being requested and the time periods and the quality improvement activity that prompted the request.

2. The laboratory data may be provided in written or electronic format based on the agreement between the laboratory and the contractor or program contractor. If there is no contract between the laboratory and the contractor or program contractor, the laboratory shall provide the requested data in a format agreed to by the noncontracted laboratory.

3. The laboratory test results provided to the member's contractor or program contractor shall only be used for quality improvement activities authorized by the administration and health care outcome studies required by the administration. The contractors and program contractors shall maintain strict confidentiality about the test results and identity of the member as specified in contractual arrangements with the administration and pursuant to state and federal law.

4. The administration, after collaboration with the department of health services regarding quality improvement activities, may prohibit the contractors and program contractors from receiving certain test results if the administration determines that a serious potential exists that the results may be used for purposes other than those intended for the quality improvement activities. The department of health services shall consult with the clinical laboratory licensure advisory committee established by section 36‑465 before providing recommendations to the administration on certain test results and quality improvement activities.

5. The administration shall provide contracted laboratories and the department of health services with an annual report listing the quality improvement activities that will require laboratory data. The report shall be updated and distributed to the contracting laboratories and the department of health services when laboratory data is needed for new quality improvement activities.

6. A laboratory that complies with a request from the contractor or program contractor for laboratory results pursuant to this section is not subject to civil liability for providing the data to the contractor or program contractor. The administration, the contractor or a program contractor that uses data for reasons other than quality improvement activities is subject to civil liability for this improper use.

R. Q. For the purposes of this section, "quality improvement activities" means those requirements, including health care outcome studies specified in federal law or required by the centers for medicare and medicaid services or the administration, to improve health care outcomes. END_STATUTE

Sec. 12. Section 36-2903.01, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2903.01. Additional powers and duties; report

A. The director of the Arizona health care cost containment system administration may adopt rules that provide that the system may withhold or forfeit payments to be made to a noncontracting provider by the system if the noncontracting provider fails to comply with this article, the provider agreement or rules that are adopted pursuant to this article and that relate to the specific services rendered for which a claim for payment is made.

B. The director shall:

1. Prescribe uniform forms to be used by all contractors. The rules shall require a written and signed application by the applicant or an applicant's authorized representative, or, if the person is incompetent or incapacitated, a family member or a person acting responsibly for the applicant may obtain a signature or a reasonable facsimile and file the application as prescribed by the administration.

2. Enter into an interagency agreement with the department to establish a streamlined eligibility process to determine the eligibility of all persons defined pursuant to section 36‑2901, paragraph 6, subdivision (a). At the administration's option, the interagency agreement may allow the administration to determine the eligibility of certain persons, including those defined pursuant to section 36‑2901, paragraph 6, subdivision (a).

3. Enter into an intergovernmental agreement with the department to:

(a) Establish an expedited eligibility and enrollment process for all persons who are hospitalized at the time of application.

(b) Establish performance measures and incentives for the department.

(c) Establish the process for management evaluation reviews that the administration shall perform to evaluate the eligibility determination functions performed by the department.

(d) Establish eligibility quality control reviews by the administration.

(e) Require the department to adopt rules, consistent with the rules adopted by the administration for a hearing process, that applicants or members may use for appeals of eligibility determinations or redeterminations.

(f) Establish the department's responsibility to place sufficient eligibility workers at federally qualified health centers to screen for eligibility and at hospital sites and level one trauma centers to ensure that persons seeking hospital services are screened on a timely basis for eligibility for the system, including a process to ensure that applications for the system can be accepted on a twenty‑four hour basis, seven days a week.

(g) Withhold payments based on the allowable sanctions for errors in eligibility determinations or redeterminations or failure to meet performance measures required by the intergovernmental agreement.

(h) Recoup from the department all federal fiscal sanctions that result from the department's inaccurate eligibility determinations. The director may offset all or part of a sanction if the department submits a corrective action plan and a strategy to remedy the error.

4. By rule establish a procedure and time frames for the intake of grievances and requests for hearings, for the continuation of benefits and services during the appeal process and for a grievance process at the contractor level. Notwithstanding sections 41‑1092.02, 41‑1092.03 and 41‑1092.05, the administration shall develop rules to establish the procedure and time frame for the informal resolution of grievances and appeals. A grievance that is not related to a claim for payment of system covered services shall be filed in writing with and received by the administration or the prepaid capitated provider contractor or program contractor not later than sixty days after the date of the adverse action, decision or policy implementation being grieved. A grievance that is related to a claim for payment of system covered services must be filed in writing and received by the administration or the prepaid capitated provider or program contractor within twelve months after the date of service, within twelve months after the date that eligibility is posted or within sixty days after the date of the denial of a timely claim submission, whichever is later. A grievance for the denial of a claim for reimbursement of services may contest the validity of any adverse action, decision, policy implementation or rule that related to or resulted in the full or partial denial of the claim. A policy implementation may be subject to a grievance procedure, but it may not be appealed for a hearing. The administration is not required to participate in a mandatory settlement conference if it is not a real party in interest. In any proceeding before the administration, including a grievance or hearing, persons may represent themselves or be represented by a duly authorized agent who is not charging a fee. A legal entity may be represented by an officer, partner or employee who is specifically authorized by the legal entity to represent it in the particular proceeding.

5. Apply for and accept federal funds available under title XIX of the social security act (P.L. 89‑97; 79 Stat. 344; 42 United States Code section 1396 (1980)) in support of the system. The application made by the director pursuant to this paragraph shall be designed to qualify for federal funding primarily on a prepaid capitated basis. Such funds may be used only for the support of persons defined as eligible pursuant to title XIX of the social security act or the approved section 1115 waiver.

6. At least thirty days before the implementation of a policy or a change to an existing policy relating to reimbursement, provide notice to interested parties. Parties interested in receiving notification of policy changes shall submit a written request for notification to the administration.

7. In addition to the cost sharing requirements specified in subsection D, paragraph 4 of this section:

(a) Charge monthly premiums up to the maximum amount allowed by federal law to all populations of eligible persons who may be charged.

(b) Implement this paragraph to the extent permitted under the federal deficit reduction act of 2005 and other federal laws, subject to the approval of federal waiver authority and to the extent that any changes in the cost sharing requirements under this paragraph would permit this state to receive any enhanced federal matching rate.

C. The director is authorized to apply for any federal funds available for the support of programs to investigate and prosecute violations arising from the administration and operation of the system. Available state funds appropriated for the administration and operation of the system may be used as matching funds to secure federal funds pursuant to this subsection.

D. The director may adopt rules or procedures to do the following:

1. Authorize advance payments based on estimated liability to a contractor or a noncontracting provider after the contractor or noncontracting provider has submitted a claim for services and before the claim is ultimately resolved. The rules shall specify that any advance payment shall be conditioned on the execution before payment of a contract with the contractor or noncontracting provider that requires the administration to retain a specified percentage, which shall be at least twenty per cent, of the claimed amount as security and that requires repayment to the administration if the administration makes any overpayment.

2. Defer liability, in whole or in part, of contractors for care provided to members who are hospitalized on the date of enrollment or under other circumstances. Payment shall be on a capped fee‑for‑service basis for services other than hospital services and at the rate established pursuant to subsection G of this section for hospital services or at the rate paid by the health plan, whichever is less.

3. Deputize, in writing, any qualified officer or employee in the administration to perform any act that the director by law is empowered to do or charged with the responsibility of doing, including the authority to issue final administrative decisions pursuant to section 41‑1092.08.

4. Notwithstanding any other law, require persons eligible pursuant to section 36‑2901, paragraph 6, subdivision (a), section 36‑2931 and section 36‑2981, paragraph 6 to be financially responsible for any cost sharing requirements established in a state plan or a section 1115 waiver and approved by the centers for medicare and medicaid services. Cost sharing requirements may include copayments, coinsurance, deductibles, enrollment fees and monthly premiums for enrolled members, including households with children enrolled in the Arizona long‑term care system.

E. The director shall adopt rules that further specify the medical care and hospital services that are covered by the system pursuant to section 36‑2907.

F. In addition to the rules otherwise specified in this article, the director may adopt necessary rules pursuant to title 41, chapter 6 to carry out this article. Rules adopted by the director pursuant to this subsection shall consider the differences between rural and urban conditions on the delivery of hospitalization and medical care.

G. For inpatient hospital admissions and outpatient hospital services on and after March 1, 1993, the administration shall adopt rules for the reimbursement of hospitals according to the following procedures:

1. For inpatient hospital stays from March 1, 1993 through September 30, 2013, the administration shall use a prospective tiered per diem methodology, using hospital peer groups if analysis shows that cost differences can be attributed to independently definable features that hospitals within a peer group share. In peer grouping the administration may consider such factors as length of stay differences and labor market variations. If there are no cost differences, the administration shall implement a stop loss‑stop gain or similar mechanism. Any stop loss‑stop gain or similar mechanism shall ensure that the tiered per diem rates assigned to a hospital do not represent less than ninety per cent of its 1990 base year costs or more than one hundred ten per cent of its 1990 base year costs, adjusted by an audit factor, during the period of March 1, 1993 through September 30, 1994. The tiered per diem rates set for hospitals shall represent no less than eighty‑seven and one‑half per cent or more than one hundred twelve and one‑half per cent of its 1990 base year costs, adjusted by an audit factor, from October 1, 1994 through September 30, 1995 and no less than eighty‑five per cent or more than one hundred fifteen per cent of its 1990 base year costs, adjusted by an audit factor, from October 1, 1995 through September 30, 1996. For the periods after September 30, 1996 no stop loss‑stop gain or similar mechanisms shall be in effect. An adjustment in the stop loss‑stop gain percentage may be made to ensure that total payments do not increase as a result of this provision. If peer groups are used, the administration shall establish initial peer group designations for each hospital before implementation of the per diem system. The administration may also use a negotiated rate methodology. The tiered per diem methodology may include separate consideration for specialty hospitals that limit their provision of services to specific patient populations, such as rehabilitative patients or children. The initial per diem rates shall be based on hospital claims and encounter data for dates of service November 1, 1990 through October 31, 1991 and processed through May of 1992.

2. For rates effective on October 1, 1994, and annually through September 30, 2011, the administration shall adjust tiered per diem payments for inpatient hospital care by the data resources incorporated market basket index for prospective payment system hospitals. For rates effective beginning on October 1, 1999, the administration shall adjust payments to reflect changes in length of stay for the maternity and nursery tiers.

3. Through June 30, 2004, for outpatient hospital services, the administration shall reimburse a hospital by applying a hospital specific outpatient cost‑to‑charge ratio to the covered charges. Beginning on July 1, 2004 through June 30, 2005, the administration shall reimburse a hospital by applying a hospital specific outpatient cost‑to‑charge ratio to covered charges. If the hospital increases its charges for outpatient services filed with the Arizona department of health services pursuant to chapter 4, article 3 of this title, by more than 4.7 per cent for dates of service effective on or after July 1, 2004, the hospital specific cost‑to‑charge ratio will be reduced by the amount that it exceeds 4.7 per cent. If charges exceed 4.7 per cent, the effective date of the increased charges will be the effective date of the adjusted Arizona health care cost containment system cost‑to‑charge ratio. The administration shall develop the methodology for a capped fee‑for‑service schedule and a statewide cost‑to‑charge ratio. Any covered outpatient service not included in the capped fee‑for‑service schedule shall be reimbursed by applying the statewide cost‑to‑charge ratio that is based on the services not included in the capped fee‑for‑service schedule. Beginning on July 1, 2005, the administration shall reimburse clean claims with dates of service on or after July 1, 2005, based on the capped fee‑for‑service schedule or the statewide cost‑to‑charge ratio established pursuant to this paragraph. The administration may make additional adjustments to the outpatient hospital rates established pursuant to this section based on other factors, including the number of beds in the hospital, specialty services available to patients and the geographic location of the hospital.

4. Except if submitted under an electronic claims submission system, a hospital bill is considered received for purposes of this paragraph on initial receipt of the legible, error‑free claim form by the administration if the claim includes the following error‑free documentation in legible form:

(a) An admission face sheet.

(b) An itemized statement.

(d) A discharge summary or an interim summary if the claim is split.

(e) An emergency record, if admission was through the emergency room.

(f) Operative reports, if applicable.

(g) A labor and delivery room report, if applicable.

Payment received by a hospital from the administration pursuant to this subsection or from a contractor either by contract or pursuant to section 36‑2904, subsection I H is considered payment by the administration or the contractor of the administration's or contractor's liability for the hospital bill. A hospital may collect any unpaid portion of its bill from other third‑party payors or in situations covered by title 33, chapter 7, article 3.

5. For services rendered on and after October 1, 1997, the administration shall pay a hospital's rate established according to this section subject to the following:

(a) If the hospital's bill is paid within thirty days of the date the bill was received, the administration shall pay ninety‑nine per cent of the rate.

(b) If the hospital's bill is paid after thirty days but within sixty days of the date the bill was received, the administration shall pay one hundred per cent of the rate.

(c) If the hospital's bill is paid any time after sixty days of the date the bill was received, the administration shall pay one hundred per cent of the rate plus a fee of one per cent per month for each month or portion of a month following the sixtieth day of receipt of the bill until the date of payment.

6. In developing the reimbursement methodology, if a review of the reports filed by a hospital pursuant to section 36‑125.04 indicates that further investigation is considered necessary to verify the accuracy of the information in the reports, the administration may examine the hospital's records and accounts related to the reporting requirements of section 36‑125.04. The administration shall bear the cost incurred in connection with this examination unless the administration finds that the records examined are significantly deficient or incorrect, in which case the administration may charge the cost of the investigation to the hospital examined.

7. Except for privileged medical information, the administration shall make available for public inspection the cost and charge data and the calculations used by the administration to determine payments under the tiered per diem system, provided that individual hospitals are not identified by name. The administration shall make the data and calculations available for public inspection during regular business hours and shall provide copies of the data and calculations to individuals requesting such copies within thirty days of receipt of a written request. The administration may charge a reasonable fee for the provision of the data or information.

8. The prospective tiered per diem payment methodology for inpatient hospital services shall include a mechanism for the prospective payment of inpatient hospital capital related costs. The capital payment shall include hospital specific and statewide average amounts. For tiered per diem rates beginning on October 1, 1999, the capital related cost component is frozen at the blended rate of forty per cent of the hospital specific capital cost and sixty per cent of the statewide average capital cost in effect as of January 1, 1999 and as further adjusted by the calculation of tier rates for maternity and nursery as prescribed by law. Through September 30, 2011, the administration shall adjust the capital related cost component by the data resources incorporated market basket index for prospective payment system hospitals.

9. For graduate medical education programs:

(a) Beginning September 30, 1997, the administration shall establish a separate graduate medical education program to reimburse hospitals that had graduate medical education programs that were approved by the administration as of October 1, 1999. The administration shall separately account for monies for the graduate medical education program based on the total reimbursement for graduate medical education reimbursed to hospitals by the system in federal fiscal year 1995‑1996 pursuant to the tiered per diem methodology specified in this section. The graduate medical education program reimbursement shall be adjusted annually by the increase or decrease in the index published by the global insight hospital market basket index for prospective hospital reimbursement. Subject to legislative appropriation, on an annual basis, each qualified hospital shall receive a single payment from the graduate medical education program that is equal to the same percentage of graduate medical education reimbursement that was paid by the system in federal fiscal year 1995‑1996. Any reimbursement for graduate medical education made by the administration shall not be subject to future settlements or appeals by the hospitals to the administration. The monies available under this subdivision shall not exceed the fiscal year 2005-2006 appropriation adjusted annually by the increase or decrease in the index published by the global insight hospital market basket index for prospective hospital reimbursement, except for monies distributed for expansions pursuant to subdivision (b) of this paragraph.

(b) The monies available for graduate medical education programs pursuant to this subdivision shall not exceed the fiscal year 2006-2007 appropriation adjusted annually by the increase or decrease in the index published by the global insight hospital market basket index for prospective hospital reimbursement. Graduate medical education programs eligible for such reimbursement are not precluded from receiving reimbursement for funding under subdivision (c) of this paragraph. Beginning July 1, 2006, the administration shall distribute any monies appropriated for graduate medical education above the amount prescribed in subdivision (a) of this paragraph in the following order or priority:

(i) For the direct costs to support the expansion of graduate medical education programs established before July 1, 2006 at hospitals that do not receive payments pursuant to subdivision (a) of this paragraph. These programs must be approved by the administration.

(ii) For the direct costs to support the expansion of graduate medical education programs established on or before October 1, 1999. These programs must be approved by the administration.

(c) The administration shall distribute to hospitals any monies appropriated for graduate medical education above the amount prescribed in subdivisions (a) and (b) of this paragraph for the following purposes:

(i) For the direct costs of graduate medical education programs established or expanded on or after July 1, 2006. These programs must be approved by the administration.

(ii) For a portion of additional indirect graduate medical education costs for programs that are located in a county with a population of less than five hundred thousand persons at the time the residency position was created or for a residency position that includes a rotation in a county with a population of less than five hundred thousand persons at the time the residency position was established. These programs must be approved by the administration.

(d) The administration shall develop, by rule, the formula by which the monies are distributed.

(e) Each graduate medical education program that receives funding pursuant to subdivision (b) or (c) of this paragraph shall identify and report to the administration the number of new residency positions created by the funding provided in this paragraph, including positions in rural areas. The program shall also report information related to the number of funded residency positions that resulted in physicians locating their practice in this state. The administration shall report to the joint legislative budget committee by February 1 of each year on the number of new residency positions as reported by the graduate medical education programs.

(f) Local, county and tribal governments and any university under the jurisdiction of the Arizona board of regents may provide monies in addition to any state general fund monies appropriated for graduate medical education in order to qualify for additional matching federal monies for providers, programs or positions in a specific locality and costs incurred pursuant to a specific contract between the administration and providers or other entities to provide graduate medical education services as an administrative activity. Payments by the administration pursuant to this subdivision may be limited to those providers designated by the funding entity and may be based on any methodology deemed appropriate by the administration, including replacing any payments that might otherwise have been paid pursuant to subdivision (a), (b) or (c) of this paragraph had sufficient state general fund monies or other monies been appropriated to fully fund those payments. These programs, positions, payment methodologies and administrative graduate medical education services must be approved by the administration and the centers for medicare and medicaid services. The administration shall report to the president of the senate, the speaker of the house of representatives and the director of the joint legislative budget committee on or before July 1 of each year on the amount of money contributed and number of residency positions funded by local, county and tribal governments, including the amount of federal matching monies used.

(g) Any funds appropriated but not allocated by the administration for subdivision (b) or (c) of this paragraph may be reallocated if funding for either subdivision is insufficient to cover appropriate graduate medical education costs.

10. Notwithstanding section 41‑1005, subsection A, paragraph 9, the administration shall adopt rules pursuant to title 41, chapter 6 establishing the methodology for determining the prospective tiered per diem payments that are in effect through September 30, 2013.

11. For inpatient hospital services rendered on or after October 1, 2011, the prospective tiered per diem payment rates are permanently reset to the amounts payable for those services as of September 30, 2011 pursuant to this subsection.

12. The administration shall obtain legislative approval before adopting a hospital reimbursement methodology consistent with title XIX of the social security act for inpatient dates of service on and after October 1, 2013.

H. The director may adopt rules that specify enrollment procedures, including notice to contractors of enrollment. The rules may provide for varying time limits for enrollment in different situations. The administration shall specify in contract when a person who has been determined eligible will be enrolled with that contractor and the date on which the contractor will be financially responsible for health and medical services to the person.

I. The administration may make direct payments to hospitals for hospitalization and medical care provided to a member in accordance with this article and rules. The director may adopt rules to establish the procedures by which the administration shall pay hospitals pursuant to this subsection if a contractor fails to make timely payment to a hospital. Such payment shall be at a level determined pursuant to section 36‑2904, subsection H or I G or H. The director may withhold payment due to a contractor in the amount of any payment made directly to a hospital by the administration on behalf of a contractor pursuant to this subsection.

J. The director shall establish a special unit within the administration for the purpose of monitoring the third-party payment collections required by contractors and noncontracting providers pursuant to section 36‑2903, subsection B, paragraph 10 and subsection F and section 36‑2915, subsection E. The director shall determine by rule:

1. The type of third-party payments to be monitored pursuant to this subsection.

2. The percentage of third-party payments that is collected by a contractor or noncontracting provider and that the contractor or noncontracting provider may keep and the percentage of such payments that the contractor or noncontracting provider may be required to pay to the administration. Contractors and noncontracting providers must pay to the administration one hundred per cent of all third-party payments that are collected and that duplicate administration fee‑for‑service payments. A contractor that contracts with the administration pursuant to section 36‑2904, subsection A may be entitled to retain a percentage of third-party payments if the payments collected and retained by a contractor are reflected in reduced capitation rates. A contractor may be required to pay the administration a percentage of third-party payments that are collected by a contractor and that are not reflected in reduced capitation rates.

K. The administration shall establish procedures to apply to the following if a provider that has a contract with a contractor or noncontracting provider seeks to collect from an individual or financially responsible relative or representative a claim that exceeds the amount that is reimbursed or should be reimbursed by the system:

1. On written notice from the administration or oral or written notice from a member that a claim for covered services may be in violation of this section, the provider that has a contract with a contractor or noncontracting provider shall investigate the inquiry and verify whether the person was eligible for services at the time that covered services were provided. If the claim was paid or should have been paid by the system, the provider that has a contract with a contractor or noncontracting provider shall not continue billing the member.

2. If the claim was paid or should have been paid by the system and the disputed claim has been referred for collection to a collection agency or referred to a credit reporting bureau, the provider that has a contract with a contractor or noncontracting provider shall:

(a) Notify the collection agency and request that all attempts to collect this specific charge be terminated immediately.

(b) Advise all credit reporting bureaus that the reported delinquency was in error and request that the affected credit report be corrected to remove any notation about this specific delinquency.

(c) Notify the administration and the member that the request for payment was in error and that the collection agency and credit reporting bureaus have been notified.

3. If the administration determines that a provider that has a contract with a contractor or noncontracting provider has billed a member for charges that were paid or should have been paid by the administration, the administration shall send written notification by certified mail or other service with proof of delivery to the provider that has a contract with a contractor or noncontracting provider stating that this billing is in violation of federal and state law. If, twenty-one days or more after receiving the notification, a provider that has a contract with a contractor or noncontracting provider knowingly continues billing a member for charges that were paid or should have been paid by the system, the administration may assess a civil penalty in an amount equal to three times the amount of the billing and reduce payment to the provider that has a contract with a contractor or noncontracting provider accordingly. Receipt of delivery signed by the addressee or the addressee's employee is prima facie evidence of knowledge. Civil penalties collected pursuant to this subsection shall be deposited in the state general fund. Section 36‑2918, subsections C, D and F, relating to the imposition, collection and enforcement of civil penalties, apply to civil penalties imposed pursuant to this paragraph.

L. The administration may conduct postpayment review of all claims paid by the administration and may recoup any monies erroneously paid. The director may adopt rules that specify procedures for conducting postpayment review. A contractor may conduct a postpayment review of all claims paid by the contractor and may recoup monies that are erroneously paid.

M. Subject to title 41, chapter 4, article 4, the director or the director's designee may employ and supervise personnel necessary to assist the director in performing the functions of the administration.

N. The administration may contract with contractors for obstetrical care who are eligible to provide services under title XIX of the social security act.

O. Notwithstanding any other law, on federal approval the administration may make disproportionate share payments to private hospitals, county operated hospitals, including hospitals owned or leased by a special health care district, and state operated institutions for mental disease beginning October 1, 1991 in accordance with federal law and subject to legislative appropriation. If at any time the administration receives written notification from federal authorities of any change or difference in the actual or estimated amount of federal funds available for disproportionate share payments from the amount reflected in the legislative appropriation for such purposes, the administration shall provide written notification of such change or difference to the president and the minority leader of the senate, the speaker and the minority leader of the house of representatives, the director of the joint legislative budget committee, the legislative committee of reference and any hospital trade association within this state, within three working days not including weekends after receipt of the notice of the change or difference. In calculating disproportionate share payments as prescribed in this section, the administration may use either a methodology based on claims and encounter data that is submitted to the administration from contractors or a methodology based on data that is reported to the administration by private hospitals and state operated institutions for mental disease. The selected methodology applies to all private hospitals and state operated institutions for mental disease qualifying for disproportionate share payments. For the purposes of this subsection, "disproportionate share payment" means a payment to a hospital that serves a disproportionate share of low-income patients as described by 42 United States Code section 1396r-4.

P. Notwithstanding any law to the contrary, the administration may receive confidential adoption information to determine whether an adopted child should be terminated from the system.

Q. The adoption agency or the adoption attorney shall notify the administration within thirty days after an eligible person receiving services has placed that person's child for adoption.

R. If the administration implements an electronic claims submission system, it may adopt procedures pursuant to subsection G of this section requiring documentation different than prescribed under subsection G, paragraph 4 of this section.

S. In addition to any requirements adopted pursuant to subsection D, paragraph 4 of this section, notwithstanding any other law, subject to approval by the centers for medicare and medicaid services, beginning July 1, 2011, members eligible pursuant to section 36‑2901, paragraph 6, subdivision (a), section 36‑2931 and section 36‑2981, paragraph 6 shall pay the following:

1. A monthly premium of fifteen dollars, except that the total monthly premium for an entire household shall not exceed sixty dollars.

2. A copayment of five dollars for each physician office visit.

3. A copayment of ten dollars for each urgent care visit.

4. A copayment of thirty dollars for each emergency department visit. END_STATUTE

Sec. 13. Delayed repeal

Section 36-2903.05, Arizona Revised Statutes, is repealed from and after December 31, 2013.

Sec. 14. Section 36-2904, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2904. Prepaid capitation coverage; requirements; long‑term care; dispute resolution; award of contracts; notification; report

A. The administration may expend public funds appropriated for the purposes of this article and shall execute prepaid capitated health services contracts, pursuant to section 36‑2906, with group disability insurers, hospital and medical service corporations, health care services organizations and any other appropriate public or private persons, including county‑owned and operated facilities, for health and medical services to be provided under contract with contractors. The administration may assign liability for eligible persons and members through contractual agreements with contractors. If there is an insufficient number of qualified bids for prepaid capitated health services contracts for the provision of hospitalization and medical care within a county, the director may:

1. Execute discount advance payment contracts, pursuant to section 36‑2906 and subject to section 36‑2903.01, for hospital services.

2. Execute capped fee‑for‑service contracts for health and medical services, other than hospital services. Any capped fee‑for‑service contract shall provide for reimbursement at a level of not to exceed a capped fee‑for‑service schedule adopted by the administration.

B. During any period in which services are needed and no contract exists, the director may do either of the following:

1. Pay noncontracting providers for health and medical services, other than hospital services, on a capped fee‑for‑service basis for members and persons who are determined eligible. However, the state shall not pay any amount for services that exceeds a maximum amount set forth in a capped fee‑for‑service schedule adopted by the administration.

2. Pay a hospital subject to the reimbursement level limitation prescribed in section 36‑2903.01.

If health and medical services are provided in the absence of a contract, the director shall continue to attempt to procure by the bid process as provided in section 36‑2906 contracts for such services as specified in this subsection.

C. Payments to contractors shall be made monthly or quarterly and may be subject to contract provisions requiring the retention of a specified percentage of the payment by the director, a reserve fund or other contract provisions by which adjustments to the payments are made based on utilization efficiency, including incentives for maintaining quality care and minimizing unnecessary inpatient services. Reserve funds withheld from contractors shall be distributed to contractors who meet performance standards established by the director. Any reserve fund established pursuant to this subsection shall be established as a separate account within the Arizona health care cost containment system fund.

D. Except as prescribed in subsection E of this section, A member defined as eligible pursuant to section 36‑2901, paragraph 6, subdivision (a) may select, to the extent practicable as determined by the administration, from among the available contractors of hospitalization and medical care and may select a primary care physician or primary care practitioner from among the primary care physicians and primary care practitioners participating in the contract in which the member is enrolled. The administration shall provide reimbursement only to entities that have a provider agreement with the administration and that have agreed to the contractual requirements of that agreement. Except as provided in sections 36‑2908 and 36‑2909, the system shall only provide reimbursement for any health or medical services or costs of related services provided by or under referral from the primary care physician or primary care practitioner participating in the contract in which the member is enrolled. The director shall establish requirements as to the minimum time period that a member is assigned to specific contractors in the system.

E. For a member defined as eligible pursuant to section 36‑2901, paragraph 6, subdivision (a), item (v) the director shall enroll the member with an available contractor located in the geographic area of the member's residence. The member may select a primary care physician or primary care practitioner from among the primary care physicians or primary care practitioners participating in the contract in which the member is enrolled. The system shall only provide reimbursement for health or medical services or costs of related services provided by or under referral from a primary care physician or primary care practitioner participating in the contract in which the member is enrolled. The director shall establish requirements as to the minimum time period that a member is assigned to specific contractors in the system.

F. E. If a person who has been determined eligible but who has not yet enrolled in the system receives emergency services, the director shall provide by rule for the enrollment of the person on a priority basis. If a person requires system covered services on or after the date the person is determined eligible for the system but before the date of enrollment, the person is entitled to receive these services in accordance with rules adopted by the director, and the administration shall pay for the services pursuant to section 36‑2903.01 or, as specified in contract, with the contractor pursuant to the subcontracted rate or this section.

G. F. The administration shall not pay claims for system covered services that are initially submitted more than six months after the date of the service for which payment is claimed or after the date that eligibility is posted, whichever date is later, or that are submitted as clean claims more than twelve months after the date of service for which payment is claimed or after the date that eligibility is posted, whichever date is later, except for claims submitted for reinsurance pursuant to section 36‑2906, subsection C, paragraph 6. The administration shall not pay claims for system covered services that are submitted by contractors for reinsurance after the time period specified in the contract. The director may adopt rules or require contractual provisions that prescribe requirements and time limits for submittal of and payment for those claims. Notwithstanding any other provision of this article, if a claim that gives rise to a contractor's claim for reinsurance or deferred liability is the subject of an administrative grievance or appeal proceeding or other legal action, the contractor shall have at least sixty days after an ultimate decision is rendered to submit a claim for reinsurance or deferred liability. Contractors that contract with the administration pursuant to subsection A of this section shall not pay claims for system covered services that are initially submitted more than six months after the date of the service for which payment is claimed or after the date that eligibility is posted, whichever date is later, or that are submitted as clean claims more than twelve months after the date of the service for which payment is claimed or after the date that eligibility is posted, whichever date is later. For the purposes of this subsection:

1. "Clean claims" means claims that may be processed without obtaining additional information from the subcontracted provider of care, from a noncontracting provider or from a third party but does not include claims under investigation for fraud or abuse or claims under review for medical necessity.

2. "Date of service" for a hospital inpatient means the date of discharge of the patient.

3. "Submitted" means the date the claim is received by the administration or the prepaid capitated provider, whichever is applicable, as established by the date stamp on the face of the document or other record of receipt.

H. G. In any county having a population of five hundred thousand or fewer persons, a hospital that executes a subcontract other than a capitation contract with a contractor for the provision of hospital and medical services pursuant to this article shall offer a subcontract to any other contractor providing services to that portion of the county and to any other person that plans to become a contractor in that portion of the county. If such a hospital executes a subcontract other than a capitation contract with a contractor for the provision of hospital and medical services pursuant to this article, the hospital shall adopt uniform criteria to govern the reimbursement levels paid by all contractors with whom the hospital executes such a subcontract. Reimbursement levels offered by hospitals to contractors pursuant to this subsection may vary among contractors only as a result of the number of bed days purchased by the contractors, the amount of financial deposit required by the hospital, if any, or the schedule of performance discounts offered by the hospital to the contractor for timely payment of claims.

I. H. This subsection applies to inpatient hospital admissions and to outpatient hospital services on and after March 1, 1993. The director may negotiate at any time with a hospital on behalf of a contractor for services provided pursuant to this article. If a contractor negotiates with a hospital for services provided pursuant to this article, the following procedures apply:

1. The director shall require any contractor to reimburse hospitals for services provided under this article based on reimbursement levels that do not in the aggregate exceed those established pursuant to section 36‑2903.01 and under terms on which the contractor and the hospital agree. However, a hospital and a contractor may agree on a different payment methodology than the methodology prescribed by the director pursuant to section 36‑2903.01. The director by rule shall prescribe:

(a) The time limits for any negotiation between the contractor and the hospital.

(b) The ability of the director to review and approve or disapprove the reimbursement levels and terms agreed on by the contractor and the hospital.

(c) That if a contractor and a hospital do not agree on reimbursement levels and terms as required by this subsection, the reimbursement levels established pursuant to section 36‑2903.01 apply.

(d) That, except if submitted under an electronic claims submission system, a hospital bill is considered received for purposes of subdivision (f) on initial receipt of the legible, error‑free claim form by the contractor if the claim includes the following error‑free documentation in legible form:

(i) An admission face sheet.

(ii) An itemized statement.

(iii) An admission history and physical.

(iv) A discharge summary or an interim summary if the claim is split.

(v) An emergency record, if admission was through the emergency room.

(vi) Operative reports, if applicable.

(vii) A labor and delivery room report, if applicable.

(e) That payment received by a hospital from a contractor is considered payment by the contractor of the contractor's liability for the hospital bill. A hospital may collect any unpaid portion of its bill from other third party payors or in situations covered by title 33, chapter 7, article 3.

(f) That a contractor shall pay for services rendered on and after October 1, 1997 under any reimbursement level according to paragraph 1 of this subsection subject to the following:

(i) If the hospital's bill is paid within thirty days of the date the bill was received, the contractor shall pay ninety‑nine per cent of the rate.

(ii) If the hospital's bill is paid after thirty days but within sixty days of the date the bill was received, the contractor shall pay one hundred per cent of the rate.

(iii) If the hospital's bill is paid any time after sixty days of the date the bill was received, the contractor shall pay one hundred per cent of the rate plus a fee of one per cent per month for each month or portion of a month following the sixtieth day of receipt of the bill until the date of payment.

2. In any county having a population of five hundred thousand or fewer persons, a hospital that executes a subcontract other than a capitation contract with a provider for the provision of hospital and medical services pursuant to this article shall offer a subcontract to any other provider providing services to that portion of the county and to any other person that plans to become a provider in that portion of the county. If a hospital executes a subcontract other than a capitation contract with a provider for the provision of hospital and medical services pursuant to this article, the hospital shall adopt uniform criteria to govern the reimbursement levels paid by all providers with whom the hospital executes a subcontract.

J. I. If there is an insufficient number of, or an inadequate member capacity in, contracts awarded to contractors, the director, in order to deliver covered services to members enrolled or expected to be enrolled in the system within a county, may negotiate and award, without bid, a contract with a health care services organization holding a certificate of authority pursuant to title 20, chapter 4, article 9. The director shall require a health care services organization contracting under this subsection to comply with section 36‑2906.01. The term of the contract shall not extend beyond the next bid and contract award process as provided in section 36‑2906 and shall be no greater than capitation rates paid to contractors in the same county or counties pursuant to section 36‑2906. Contracts awarded pursuant to this subsection are exempt from the requirements of title 41, chapter 23.

K. J. A contractor may require that a subcontracting or noncontracting provider shall be paid for covered services, other than hospital services, according to the capped fee‑for‑service schedule adopted by the director pursuant to subsection A, paragraph 2 of this section or subsection B, paragraph 1 of this section or at lower rates as may be negotiated by the contractor.

L. K. The director shall require any contractor to have a plan to notify members of reproductive age either directly or through the parent or legal guardian, whichever is most appropriate, of the specific covered family planning services available to them and a plan to deliver those services to members who request them. The director shall ensure that these plans include provisions for written notification, other than the member handbook, and verbal notification during a member's visit with the member's primary care physician or primary care practitioner.

M. l. The director shall adopt a plan to notify members of reproductive age who receive care from a contractor who elects not to provide family planning services of the specific covered family planning services available to them and to provide for the delivery of those services to members who request them. Notification may be directly to the member, or through the parent or legal guardian, whichever is most appropriate. The director shall ensure that the plan includes provisions for written notification, other than the member handbook, and verbal notification during a member's visit with the member's primary care physician or primary care practitioner.

N. M. The director shall prepare a report that represents a statistically valid sample and that indicates the number of children age two by contractor who received the immunizations recommended by the national centers for disease control and prevention while enrolled as members. The report shall indicate each type of immunization and the number and percentage of enrolled children in the sample age two who received each type of immunization. The report shall be done by contract year and shall be delivered to the governor, the president of the senate and the speaker of the house of representatives no later than April 1, 2004 and every second year thereafter.

O. N. If the administration implements an electronic claims submission system, it may adopt procedures pursuant to subsection I H, paragraph 1 of this section requiring documentation different than prescribed under subsection I H, paragraph 1, subdivision (d) of this section. END_STATUTE

Sec. 15. Section 36-2906, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2906. Qualified plan health services contracts; proposals; administration

A. The administration shall:

1. Supervise the administrator.

2. 1. Review the proposals.

3. 2. Award contracts.

B. The director shall prepare and issue a request for proposal, including a proposed contract format, in each of the counties of this state, at least once every five years, to qualified group disability insurers, hospital and medical service corporations, health care services organizations and any other qualified public or private persons, including county‑owned and operated health care facilities. The contracts shall specify the administrative requirements, the delivery of medically necessary services and the subcontracting requirements.

C. The director shall adopt rules regarding the request for proposal process that provide:

1. For definition of proposals in the following categories subject to the following conditions:

(a) Inpatient hospital services.

(b) Outpatient services, including emergency dental care, and early and periodic health screening and diagnostic services for children.

(d) Laboratory, x‑ray and related diagnostic medical services and appliances.

2. Allowance for the adjustment of such categories by expansion, deletion, segregation or combination in order to secure the most financially advantageous proposals for the system.

3. An allowance for limitations on the number of high risk persons that must be included in any proposal.

4. For analysis of the proposals for each geographic service area as defined by the director to ensure the provision of health and medical services that are required to be provided throughout the geographic service area pursuant to section 36‑2907.

5. For the submittal of proposals by a group disability insurer, a hospital and medical service corporation, a health care services organization or any other qualified public or private person intending to submit a proposal pursuant to this section. Each qualified proposal shall be entered with separate categories for the distinct groups of persons to be covered by the proposed contracts, as set forth in the request for proposal.

6. For the procurement of reinsurance for expenses incurred by any contractor or member or the system in providing services in excess of amounts specified by the director in any contract year. The director shall adopt rules to provide that the administrator may specify guidelines on a case by case basis for the types of care and services that may be provided to a person whose care is covered by reinsurance. The rules shall provide that if a contractor does not follow specified guidelines for care or services and if the care or services could be provided pursuant to the guidelines at a lower cost, the contractor is entitled to reimbursement as if the care or services specified in the guidelines had been provided.

7. For the awarding of contracts to contractors with qualified proposals determined to be the most advantageous to the state for each of the counties in this state. A contract may be awarded that provides services only to persons defined as eligible pursuant to section 36‑2901, paragraph 6, subdivision (b), (c), (d) or (e). The director may provide by rule a second round competitive proposal procedure for the director to request voluntary price reduction of proposals from only those that have been tentatively selected for award, before the final award or rejection of proposals.

8. For the requirement that any proposal in a geographic service area provide for the full range of system covered services.

9. For the option of the administration to waive the requirement in any request for proposal or in any contract awarded pursuant to a request for proposal for a subcontract with a hospital for good cause in a county or area, including but not limited to situations when such hospital is the only hospital in the health service area. In any situation where the subcontract requirement is waived, no hospital may refuse to treat members of the system admitted by primary care physicians or primary care practitioners with hospital privileges in that hospital. In the absence of a subcontract, the reimbursement level shall be at the levels specified in section 36‑2904, subsection H or I g or H.

D. Reinsurance may be obtained against expenses in excess of a specified amount on behalf of any individual for system covered emergency or inpatient services either through the purchase of a reinsurance policy or through a system self‑insurance program as determined by the director. Reinsurance, subject to the approval of the director, may be obtained against expenses in excess of a specified amount on behalf of any individual for outpatient services either through the purchase of a reinsurance policy or through a system self‑insurance program as determined by the director.

E. Notwithstanding the other provisions of this section, the administration may procure, provide or coordinate system covered services by interagency agreement with authorized agencies of this state or with a federal agency for distinct groups of eligible persons, including persons eligible for children's rehabilitative services and persons eligible for comprehensive medical and dental program services through the department of economic security.

F. Contracts shall be awarded as otherwise provided by law, except that in no event may a contract be awarded to any respondent that will cause the system to lose any federal monies to which it is otherwise entitled.

G. After contracts are awarded pursuant to this section, the director may negotiate with any successful proposal respondent for the expansion or contraction of services or service areas if there are unnecessary gaps or duplications in services or service areas. END_STATUTE

Sec. 16. Section 36-2907, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2907. Covered health and medical services; modifications; related delivery of service requirements; definition

A. Subject to the limitations and exclusions specified in this section, contractors shall provide the following medically necessary health and medical services:

1. Inpatient hospital services that are ordinarily furnished by a hospital for the care and treatment of inpatients and that are provided under the direction of a physician or a primary care practitioner. For the purposes of this section, inpatient hospital services exclude services in an institution for tuberculosis or mental diseases unless authorized under an approved section 1115 waiver.

2. Outpatient health services that are ordinarily provided in hospitals, clinics, offices and other health care facilities by licensed health care providers. Outpatient health services include services provided by or under the direction of a physician or a primary care practitioner.

3. Other laboratory and x‑ray services ordered by a physician or a primary care practitioner.

4. Medications that are ordered on prescription by a physician or a dentist licensed pursuant to title 32, chapter 11. Persons who are dually eligible for title XVIII and title XIX services must obtain available medications through a medicare licensed or certified medicare advantage prescription drug plan, a medicare prescription drug plan or any other entity authorized by medicare to provide a medicare part D prescription drug benefit.

5. Medical supplies, durable medical equipment and prosthetic devices ordered by a physician or a primary care practitioner. Suppliers of durable medical equipment shall provide the administration with complete information about the identity of each person who has an ownership or controlling interest in their business and shall comply with federal bonding requirements in a manner prescribed by the administration.

6. For persons who are at least twenty‑one years of age, treatment of medical conditions of the eye, excluding eye examinations for prescriptive lenses and the provision of prescriptive lenses.

7. Early and periodic health screening and diagnostic services as required by section 1905(r) of title XIX of the social security act for members who are under twenty‑one years of age.

8. Family planning services that do not include abortion or abortion counseling. If a contractor elects not to provide family planning services, this election does not disqualify the contractor from delivering all other covered health and medical services under this chapter. In that event, the administration may contract directly with another contractor, including an outpatient surgical center or a noncontracting provider, to deliver family planning services to a member who is enrolled with the contractor that elects not to provide family planning services.

9. Podiatry services ordered by a primary care physician or primary care practitioner.

10. Nonexperimental transplants approved for title XIX reimbursement.

11. Ambulance and nonambulance transportation, except as provided in subsection G of this section.

12. Hospice care.

B. The limitations and exclusions for health and medical services provided under this section are as follows:

1. Circumcision of newborn males is not a covered health and medical service.

2. For eligible persons who are at least twenty‑one years of age:

(a) Outpatient health services do not include occupational therapy or speech therapy.

(b) Prosthetic devices do not include hearing aids, dentures, bone anchored hearing aids or cochlear implants. Prosthetic devices, except prosthetic implants, may be limited to twelve thousand five hundred dollars per contract year.

(d) Durable medical equipment is limited to items covered by medicare.

(e) Podiatry services do not include services performed by a podiatrist.

(f) Nonexperimental transplants do not include the following:

(i) pancreas only transplants.

(ii) Pancreas after kidney transplants.

(iii) Lung transplants.

(iv) Hemopoetic cell allogenic unrelated transplants.

(v) Heart transplants for non‑ischemic cardiomyopathy.

(vi) Liver transplants for diagnosis of hepatitis C.

(g) Beginning October 1, 2011, bariatric surgery procedures, including laparoscopic and open gastric bypass and restrictive procedures, are not covered health and medical services.

(h) (g) Well exams are not a covered health and medical service, except mammograms, pap smears and colonoscopies.

C. The system shall pay noncontracting providers only for health and medical services as prescribed in subsection A of this section and as prescribed by rule.

D. The director shall adopt rules necessary to limit, to the extent possible, the scope, duration and amount of services, including maximum limitations for inpatient services that are consistent with federal regulations under title XIX of the social security act (P.L. 89‑97; 79 Stat. 344; 42 United States Code section 1396 (1980)). To the extent possible and practicable, these rules shall provide for the prior approval of medically necessary services provided pursuant to this chapter.

E. The director shall make available home health services in lieu of hospitalization pursuant to contracts awarded under this article. For the purposes of this subsection, "home health services" means the provision of nursing services, home health aide services or medical supplies, equipment and appliances, which that are provided on a part‑time or intermittent basis by a licensed home health agency within a member's residence based on the orders of a physician or a primary care practitioner. Home health agencies shall comply with the federal bonding requirements in a manner prescribed by the administration.

F. The director shall adopt rules for the coverage of behavioral health services for persons who are eligible under section 36‑2901, paragraph 6, subdivision (a). The administration shall contract with the department of health services for the delivery of all medically necessary behavioral health services to persons who are eligible under rules adopted pursuant to this subsection. The division of behavioral health in the department of health services shall establish a diagnostic and evaluation program to which other state agencies shall refer children who are not already enrolled pursuant to this chapter and who may be in need of behavioral health services. In addition to an evaluation, the division of behavioral health shall also identify children who may be eligible under section 36‑2901, paragraph 6, subdivision (a) or section 36‑2931, paragraph 5 and shall refer the children to the appropriate agency responsible for making the final eligibility determination.

G. The director shall adopt rules for the provision of transportation services and rules providing for copayment by members for transportation for other than emergency purposes. Subject to approval by the centers for medicare and medicaid services, nonemergency medical transportation shall not be provided except for stretcher vans and ambulance transportation. Prior authorization is required for transportation by stretcher van and for medically necessary ambulance transportation initiated pursuant to a physician's direction. Prior authorization is not required for medically necessary ambulance transportation services rendered to members or eligible persons initiated by dialing telephone number 911 or other designated emergency response systems.

H. The director may adopt rules to allow the administration, at the director's discretion, to use a second opinion procedure under which surgery may not be eligible for coverage pursuant to this chapter without documentation as to need by at least two physicians or primary care practitioners.

I. If the director does not receive bids within the amounts budgeted or if at any time the amount remaining in the Arizona health care cost containment system fund is insufficient to pay for full contract services for the remainder of the contract term, the administration, on notification to system contractors at least thirty days in advance, may modify the list of services required under subsection A of this section for persons defined as eligible other than those persons defined pursuant to section 36‑2901, paragraph 6, subdivision (a). The director may also suspend services or may limit categories of expense for services defined as optional pursuant to title XIX of the social security act (P.L. 89‑97; 79 Stat. 344; 42 United States Code section 1396 (1980)) for persons defined pursuant to section 36‑2901, paragraph 6, subdivision (a). Such reductions or suspensions do not apply to the continuity of care for persons already receiving these services.

J. Additional, reduced or modified hospitalization and medical care benefits may be provided under the system to enrolled members who are eligible pursuant to section 36‑2901, paragraph 6, subdivision (b), (c), (d) or (e).

K. All health and medical services provided under this article shall be provided in the geographic service area of the member, except:

1. Emergency services and specialty services provided pursuant to section 36‑2908.

2. That the director may permit the delivery of health and medical services in other than the geographic service area in this state or in an adjoining state if the director determines that medical practice patterns justify the delivery of services or a net reduction in transportation costs can reasonably be expected. Notwithstanding the definition of physician as prescribed in section 36‑2901, if services are procured from a physician or primary care practitioner in an adjoining state, the physician or primary care practitioner shall be licensed to practice in that state pursuant to licensing statutes in that state similar to title 32, chapter 13, 15, 17 or 25 and shall complete a provider agreement for this state.

L. Covered outpatient services shall be subcontracted by a primary care physician or primary care practitioner to other licensed health care providers to the extent practicable for purposes including, but not limited to for example, making health care services available to underserved areas, reducing costs of providing medical care and reducing transportation costs.

M. The director shall adopt rules that prescribe the coordination of medical care for persons who are eligible for system services. The rules shall include provisions for the transfer of patients, the transfer of medical records and the initiation of medical care.

N. For the purposes of this section, "ambulance" has the same meaning prescribed in section 36‑2201. END_STATUTE

Sec. 17. Delayed repeal

Section 36-2907.02, Arizona Revised Statutes, is repealed from and after December 31, 2013.

Sec. 18. Section 36-2907.10, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2907.10. Transplants; extended eligibility

A. If during a redetermination process for eligibility pursuant to this article a person who is enrolled and who is eligible pursuant to this article for a medically necessary and appropriate transplant pursuant to section 36‑2907, subsection A, paragraph 10 is determined ineligible for coverage pursuant to section 36‑2901.04 due to excess income or ineligible for coverage pursuant to section 36‑2901, paragraph 6, subdivision (a), item (i), (ii) or (iii) and that person has not yet received the transplant, the person may extend the person's eligibility based on the total spend down requirement for the household divided by the number of persons in the household.

B. In order to extend eligibility the person shall enter into a contractual agreement with a hospital to pay the amount of excess income determined pursuant to this section. The hospital shall only be reimbursed by the administration at the contracted rate of the transplantation surgery, including up to one hundred days of posttransplantation care. The administration shall deduct the amount of excess income that the person agrees to pay the hospital before payment is made to the hospital for transplant services authorized by this section. The amount of excess income shall not be changed once the extended period of eligibility begins. The administration is not responsible to pay any of the spend down amount if the person does not pay the hospital. The contracting hospital shall submit a copy of the person's contractual agreement with the hospital to the administration.

C. The administration shall authorize extended eligibility services only for transplant candidates.

D. Extended eligibility pursuant to this section is for one twelve‑month continuous period of time and is funded only pursuant to section 36‑2907.12.

E. This section does not prohibit a person from applying for eligibility pursuant to any other applicable law.

F. If the administration and a hospital that performed a transplant surgery on a person who is eligible pursuant to this section do not have a contracted rate, the administration shall not reimburse the hospital more than the contracted rate established by the administration.

G. A person who has extended eligibility pursuant to section 36‑2907.11 is not eligible for services pursuant to this section.

H. The extended eligibility of a person who is determined to be no longer medically eligible for a transplant terminates at the end of the month in which it is determined the person is not medically eligible for the transplant unless the person is otherwise eligible for services pursuant to section 36‑2901, paragraph 6, subdivision (a).END_STATUTE

Sec. 19. Section 36-2907.11, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2907.11. Retaining transplant status

A. If during a redetermination process for eligibility pursuant to this article a person who is eligible for a medically necessary and appropriate transplant as determined by the administration pursuant to section 36‑2907, subsection A, paragraph 10 is determined ineligible for coverage pursuant to section 36‑2901.04 due to excess income or ineligible for coverage pursuant to section 36‑2901, paragraph 6, subdivision (a), item (i), (ii) or (iii) and that person has not yet received the transplant, the person may enter into a contract with a hospital to pay the amount of excess income. For purposes of this section, the administration shall compute excess income based on the total spend down requirement for the household divided by the number of persons in the household. The administration shall recompute excess income pursuant to this section at the time the transplant becomes available.

B. If the hospital enters into the contractual agreement with the person, the hospital shall allow the person to retain the person's transplant candidacy status as long as the person is medically eligible, but the person is not eligible for services pursuant to this article unless that person is determined eligible pursuant to subsection D of this section.

C. A person who has extended eligibility pursuant to section 36‑2907.10 is not eligible for services pursuant to this section.

D. Once a transplant is scheduled or performed the person shall reapply for eligibility pursuant to section 36‑2901, paragraph 6, subdivision (a) and, if a spend down of excess income is necessary in order to be eligible for services pursuant to this article, the administration shall compute this income pursuant to the process specified in subsection A of this section. If the transplant is performed within thirty days before the date of the eligibility determination, the administration shall pay the hospital on a retroactive basis at the contracted rate for costs of the transplant surgery, including up to one hundred days of posttransplantation care. The administration shall deduct the amount of excess income that the person has agreed to pay the hospital before payment is made to the hospital for transplant services pursuant to this section. The amount of excess income shall not be recomputed after the date the person becomes eligible pursuant to this section. The administration is not responsible for paying any spend down amount if the person does not pay the hospital. The contracting hospital shall submit a copy of the person's contractual agreement with the hospital to the administration.

E. Eligibility pursuant to this section shall be funded only pursuant to section 36‑2907.12.

F. This section does not prohibit a person from applying for eligibility pursuant to any other applicable law.

G. If the administration and a hospital that performed a transplant surgery on a person eligible pursuant to this section do not have a contracted rate, the administration shall not reimburse the hospital more than the contracted rate established by the administration. END_STATUTE

Sec. 20. Section 36-2909, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2909. Emergency hospital services; retroactive coverage; costs

A. If a member receives emergency hospitalization and medical care on or after the date of eligibility determination or the eligibility effective date from a hospital that does not have a contract to care for the person, the administration or the contractor is liable only for the costs of emergency hospitalization and medical care up to the time the person is discharged or until the time the person can be transferred. The administration or the contractor is also liable for further care in the following circumstances:

1. If the attending physician reasonably determines that the condition of the person receiving emergency hospitalization and medical care is such that it is medically inadvisable to transfer the person.

2. If the administration or the contractor does not transport the person from the hospital providing care after it has been determined that the person can be transferred.

B. Except for charges for services subject to section 36‑2908, subsection B, all charges incurred by an eligible person who has not yet enrolled for hospitalization and medical care under subsection A of this section are payable by the administration pursuant to section 36‑2903.01, subsection G or as specified in contract by the contractor pursuant to the subcontracted rate or section 36‑2904, subsection H or I G or H.

C. As a condition to receiving reimbursement pursuant to subsection B of this section, a hospital that is not a contractor or subcontractor under the system must designate a primary care physician or primary care practitioner to act as a coordinator of the services provided to persons who have been determined eligible but have not yet enrolled, before the persons' enrollment, discharge or transfer.

D. Emergency hospitalization and medical care provided pursuant to this section shall be in accordance with rules adopted pursuant to section 36‑2903.01, subsection E in order to qualify for reimbursement.

E. The director shall adopt rules that provide that members who have been determined eligible shall be enrolled with contractors as soon as practicable.

F. This section does not prevent the director or the contractor from denying payment for hospitalization or medical care that is not authorized or deemed medically necessary in accordance with rules adopted by the director. END_STATUTE

Sec. 21. Delayed repeal

Sections 36-2912, 36-2912.01, 36-2912.02, 36-2912.03 and 36-2912.04, Arizona Revised Statutes, are repealed from and after December 31, 2013.

Sec. 22. Section 36-2913, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2913. Systems funds; funding

A. The Arizona health care cost containment system fund, long‑term care system fund and the third-party liability fund are established. The funds shall be used to pay administrative and program costs associated with the operation of the system established pursuant to this article and the long‑term care system established pursuant to article 2 of this chapter.

B. Separate accounts, including but not limited to a reserve fund, may be established within the funds. Different accounts within the funds shall be established in order to separately account for expense and income activity associated with the system established pursuant to this article and article 2 of this chapter.

C. The Arizona health care cost containment system fund and long‑term care system fund shall be comprised composed of:

1. Monies paid by each of the counties of this state of the amounts determined or withheld by the state treasurer pursuant to section 11‑292.

2. Monies paid by each county resolving to participate in the system equal to the actual cost, as limited by the board of supervisors, together with employee contributions of providing hospitalization and medical care under the system to full‑time officers and employees of the county and its departments and agencies.

3. Monies paid by this state equal to the actual cost, as limited by section 38‑651, together with employee contributions of providing hospitalization and medical care under the system to full‑time officers and employees of this state, of its departments and agencies and of cities, towns and school districts of this state.

4. Monies drawn against appropriations made by this state for the costs of operating the Arizona health care cost containment system or the long‑term care system. Monies shall be drawn against appropriations and transferred from the fund from which they were appropriated on an as needed basis only.

5. Gifts, donations and grants from any source.

6. Federal monies made available to this state for the operation of the Arizona health care cost containment system or the long‑term care system.

7. Interest paid on monies deposited in the fund.

8. Reimbursements for data collection.

D. The third-party liability fund is comprised composed of monies paid by third-party payors and lien and estate recoveries.

E. All monies in the funds other than monies appropriated by the state shall not lapse.

F. All monies drawn against appropriations made by this state remaining in the funds at the end of the fiscal year shall revert to the fund from which they were appropriated and drawn, and the appropriation shall lapse in accordance with section 35‑190. Notwithstanding the provisions of section 35‑191, subsection B, the period for administrative adjustments shall extend for only six months for appropriations made for system covered services.

G. Notwithstanding sections 35‑190 and 35‑191, all approved claims for system covered services presented after the close of the fiscal year in which they were incurred shall be paid either in accordance with subsection F of this section or in the current fiscal year with the monies available in the funds established by this section.

H. Claims for system covered services that are determined valid by the director pursuant to section 36‑2904, subsection G F and the department's grievance and appeal procedure shall be paid from the funds established by this section.

I. For purposes of this section, system covered services exclude administrative charges for operating expenses.

J. All payments for claims from the funds established by this section shall be accounted for by the administration by the fiscal year in which the claims were incurred, regardless of the fiscal year in which the payments were made.

K. Notwithstanding any other law, county owned or contracted providers and special health care district owned or contracted providers are subject to all claims processing and payment requirements or limitations of this chapter that are applicable to noncounty providers. END_STATUTE

Sec. 23. Section 36-2928, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2928. Budget neutrality compliance fund; nonlapsing

A. The budget neutrality compliance fund is established consisting of third-party liability recoveries pursuant to section 36‑2913, county contributions deposited pursuant to section 11‑292, subsection O and section 11‑300, subsection E and appropriations. The administration shall administer the fund. Monies in the fund are continuously appropriated and do not revert to the state general fund.

B. On notice from the administration, the state treasurer shall invest and divest monies in the fund as provided by section 35‑313, and monies earned from investment shall be credited to the Arizona tobacco litigation settlement fund established by section 36‑2901.02.

C. The administration shall use any remaining fund monies to pay for expenditures made pursuant to section 36‑2901.02, subsection B, paragraph 1 if sufficient monies are not available in the Arizona tobacco litigation settlement fund established by section 36‑2901.02, except that the administration shall use fund monies deposited pursuant to section 11‑292, subsection P for any direct and indirect eligibility costs associated with the expansion of program services.

D. On or before June 30 of each year, the administration shall transfer from the Arizona tobacco litigation settlement fund established by section 36‑2901.02 an amount necessary to reimburse the fund established pursuant to this section for its expenditures made to cover costs associated with the expanded definition of eligibility pursuant to section 36‑2901.01, 36‑2901.04 or 36‑2903.03.

E. Notwithstanding subsection C of this section, in fiscal year 2001‑2002, the administration shall use forty‑six million seven hundred thirty‑six thousand dollars of fund monies for maintenance of effort for the state match for persons who are determined eligible pursuant to section 36‑2901.01, 36‑2901.04 or 36‑2903.03. Beginning in fiscal year 2002‑2003 and each fiscal year thereafter, the administration shall adjust this amount for inflation based on the GDP price deflator as defined in section 41‑563. END_STATUTE

Sec. 24. Section 36-2986, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2986. Administration; powers and duties of director

A. The director has full operational authority to adopt rules or to use the appropriate rules adopted for article 1 of this chapter to implement this article, including any of the following:

1. Contract administration and oversight of contractors.

2. Development of a complete system of accounts and controls for the program, including provisions designed to ensure that covered health and medical services provided through the system are not used unnecessarily or unreasonably, including inpatient behavioral health services provided in a hospital.

3. Establishment of peer review and utilization review functions for all contractors.

4. Development and management of a contractor payment system.

5. Establishment and management of a comprehensive system for assuring quality of care.

6. Establishment and management of a system to prevent fraud by members, contractors and health care providers.

7. Development of an outreach program. The administration shall coordinate with public and private entities to provide outreach services for children under this article. Priority shall be given to those families who are moving off welfare. Outreach activities shall include strategies to inform communities, including tribal communities, about the program, ensure a wide distribution of applications and provide training for other entities to assist with the application process.

8. Coordination of benefits provided under this article for any member. The director may require that contractors and noncontracting providers are responsible for the coordination of benefits for services provided under this article. Requirements for coordination of benefits by noncontracting providers under this section are limited to coordination with standard health insurance and disability insurance policies and similar programs for health coverage. The director may require members to assign to the administration rights to all types of medical benefits to which the person is entitled, including first party medical benefits under automobile insurance policies. The state has a right of subrogation against any other person or firm to enforce the assignment of medical benefits. The provisions of this paragraph are controlling over the provisions of any insurance policy that provides benefits to a member if the policy is inconsistent with this paragraph.

9. Development and management of an eligibility, enrollment and redetermination system, including a process for quality control.

10. Establishment and maintenance of an encounter claims system that ensures that ninety per cent of the clean claims are paid within thirty days after receipt and ninety‑nine per cent of the remaining clean claims are paid within ninety days after receipt by the administration or contractor unless an alternative payment schedule is agreed to by the contractor and the provider. For the purposes of this paragraph, "clean claims" has the same meaning prescribed in section 36‑2904, subsection G F.

11. Establishment of standards for the coordination of medical care and member transfers.

12. Requiring contractors to submit encounter data in a form specified by the director.

13. Assessing civil penalties for improper billing as prescribed in section 36‑2903.01, subsection K.

B. Notwithstanding any other law, if Congress amends title XXI of the social security act and the administration is required to make conforming changes to rules adopted pursuant to this article, the administration shall request a hearing with the joint health committee of reference for review of the proposed rule changes.

C. The director may subcontract distinct administrative functions to one or more persons who may be contractors within the system.

D. The director shall require as a condition of a contract with any contractor that all records relating to contract compliance are available for inspection by the administration and that these records be maintained by the contractor for five years. The director shall also require that these records are available by a contractor on request of the secretary of the United States department of health and human services.

E. Subject to existing law relating to privilege and protection, the director shall prescribe by rule the types of information that are confidential and circumstances under which this information may be used or released, including requirements for physician‑patient confidentiality. Notwithstanding any other law, these rules shall be designed to provide for the exchange of necessary information for the purposes of eligibility determination under this article. Notwithstanding any other law, a member's medical record shall be released without the member's consent in situations of suspected cases of fraud or abuse relating to the system to an officer of this state's certified Arizona health care cost containment system fraud control unit who has submitted a written request for the medical record.

F. The director shall provide for the transition of members between contractors and noncontracting providers and the transfer of members who have been determined eligible from hospitals that do not have contracts to care for these persons.

G. To the extent that services are furnished pursuant to this article, a contractor is not subject to title 20 unless the contractor is a qualifying plan and has elected to provide services pursuant to this article.

H. As a condition of a contract, the director shall require contract terms that are necessary to ensure adequate performance by the contractor. Contract provisions required by the director include the maintenance of deposits, performance bonds, financial reserves or other financial security. The director may waive requirements for the posting of bonds or security for contractors who have posted other security, equal to or greater than that required by the administration, with a state agency for the performance of health service contracts if monies would be available from that security for the system on default by the contractor.

I. The director shall establish solvency requirements in contract that may include withholding or forfeiture of payments to be made to a contractor by the administration for the failure of the contractor to comply with a provision of the contract with the administration. The director may also require contract terms allowing the administration to operate a contractor directly under circumstances specified in the contract. The administration shall operate the contractor only as long as it is necessary to assure delivery of uninterrupted care to members enrolled with the contractor and to accomplish the orderly transition of members to other contractors or until the contractor reorganizes or otherwise corrects the contract performance failure. The administration shall not operate a contractor unless, before that action, the administration delivers notice to the contractor providing an opportunity for a hearing in accordance with procedures established by the director. Notwithstanding the provisions of a contract, if the administration finds that the public health, safety or welfare requires emergency action, it may operate as the contractor on notice to the contractor and pending an administrative hearing, which it shall promptly institute.

J. For the sole purpose of matters concerning and directly related to this article, the administration is exempt from section 41‑192.

K. The director may withhold payments to a noncontracting provider if the noncontracting provider does not comply with this article or adopted rules that relate to the specific services rendered and billed to the administration.

L. The director shall:

1. Prescribe uniform forms to be used by all contractors and furnish uniform forms and procedures, including methods of identification of members. The rules shall include requirements that an applicant personally complete or assist in the completion of eligibility application forms, except in situations in which the person is disabled.

2. By rule, establish a grievance and appeal procedure that conforms with the process and the time frames specified in article 1 of this chapter. If the program is suspended or terminated pursuant to section 36‑2985, an applicant or member is not entitled to contest the denial, suspension or termination of eligibility for the program.

3. Apply for and accept federal monies available under title XXI of the social security act. Available state monies appropriated to the administration for the operation of the program shall be used as matching monies to secure federal monies pursuant to this subsection.

M. The administration is entitled to all rights provided to the administration for liens and release of claims as specified in sections 36‑2915 and 36‑2916 and shall coordinate benefits pursuant to section 36‑2903, subsection F and be a payor of last resort for persons who are eligible pursuant to this article.

N. The director shall follow the same procedures for review committees, immunity and confidentiality that are prescribed in article 1 of this chapter. END_STATUTE

Sec. 25. Section 36-2987, Arizona Revised Statutes, is amended to read:

START_STATUTE36-2987. Reimbursement for the program

A. For inpatient hospital services, the administration shall reimburse the Indian health service or a tribal facility based on the reimbursement rates for the Indian health service as published annually in the federal register. For outpatient services, the administration shall reimburse the Indian health service or a tribal facility based on the capped fee‑for‑service schedule established by the director. If Congress authorizes one hundred per cent pass‑through of title XXI monies for services provided in an Indian health service facility or a tribal facility, the administration shall reimburse the Indian health service or the tribal facility with this enhanced federal funding based on the reimbursement rates for the Indian health service or the tribal facility as published annually in the federal register.

B. Contractors shall reimburse inpatient and outpatient services based on the reimbursement methodology established in section 36‑2904 or the hospital reimbursement pilot program established by this state.

C. For services rendered on and after October 1, 1998, the administration and the contractors shall pay a hospital's rate established according to this section subject to the following:

1. If the hospital's bill is paid within thirty days after the date the bill was received, the administration shall pay ninety‑nine per cent of the rate.

2. If the hospital's bill is paid after thirty days but within sixty days after the date the bill was received, the administration shall pay one hundred per cent of the rate.

3. If the hospital's bill is paid any time after sixty days after the date the bill was received, the administration shall pay one hundred per cent of the rate plus a fee of one per cent a month for each month or portion of a month following the sixtieth day of receipt of the bill until the date of payment.

D. The administration and the contractors shall pay claims pursuant to the methodology, definitions and time frames specified for clean claims in section 36‑2904, subsection G F.

E. The director shall specify enrollment procedures, including notice to contractors of enrollment. The administration shall specify in contract when a person who has been determined eligible will be enrolled with a contractor and the date on which the contractor will be financially responsible for health and medical services to the person.

F. The director shall monitor any third-party payment collections collected by contractors and noncontracting providers according to the same procedures specified for title XIX pursuant to section 36‑2903.01, subsection J.

G. On oral or written notice from the member, or the member's parent or legal guardian, that the member, parent or legal guardian believes a claim should be covered by the program, a contractor or noncontracting provider shall not do either of the following unless the contractor or noncontracting provider has verified through the administration that the person is ineligible for the program, has not yet been determined eligible or, at the time services were rendered, was not eligible or enrolled in the program:

1. Charge, submit a claim to or demand or otherwise collect payment from a member or person who has been determined eligible.

2. Refer or report a member or person who has been determined eligible to a collection agency or credit reporting agency for the failure of the member or person who has been determined eligible to pay charges for covered services unless specifically authorized by this article or rules adopted pursuant to this article.

H. The administration may conduct postpayment review of all payments made by the administration and may recoup any monies erroneously paid. The director may adopt rules that specify procedures for conducting postpayment review. Contractors may conduct a postpayment review of all claims paid to providers and may recoup monies that are erroneously paid.

I. The director or the director's designee may employ and supervise personnel necessary to assist the director in performing the functions of the program. END_STATUTE

Sec. 26. Section 36-3411, Arizona Revised Statutes, is amended to read:

START_STATUTE36-3411. Behavioral health services; timely reimbursement; penalties

A. The division shall ensure that behavioral health service providers are reimbursed within ninety days after the service provider submits a clean claim to a regional behavioral health authority.

B. Any contract issued by or on behalf of the division for the provision of behavioral health services shall include language outlining provisions for penalties for noncompliance with contract requirements.

C. If the regional behavioral health authority does not reimburse a provider as required by this section, the director shall subject the regional behavioral health authority to the penalty provisions prescribed in the contract, which shall not exceed the interest charges prescribed in section 44‑1201. The director shall impose any financial penalties levied on the regional behavioral health authority through a reduction in the amount of funds payable to the regional behavioral health authority for administrative expenses.

D. The ninety day deadline imposed by this section is suspended while a formal grievance regarding the legitimacy of a claim is pending.

E. The department or a regional behavioral health authority shall not pay claims for covered services that are initially submitted more than nine months after the date of the services for which payment is claimed or that are submitted as clean claims more than twelve months after the date of service for which payment is claimed. A person dissatisfied with the denial of a claim by the department or by the regional behavioral health authority has twelve months from the date of the service for which payment is claimed to institute a grievance against the department or regional behavioral health authority.

F. For claims paid by the department, either directly or through a third-party payor, the director may impose a penalty on a regional behavioral health authority or a service provider who submits a claim to the department for payment more than one time after the same claim had been previously denied by the department without having attempted to address the reason given for the denial. The penalty imposed by the director shall not exceed the average cost incurred by the department for processing a claim and shall be levied on the regional behavioral health authority or service provider through reducing any future payment or payments until the amount of the penalty has been paid.

G. This section does not apply to services provided by a hospital pursuant to section 36‑2903.01, subsection G, or section 36‑2904, subsection H or I G or H. END_STATUTE

Sec. 27. Section 41-1954, Arizona Revised Statutes, is amended to read:

START_STATUTE41-1954. Powers and duties

A. In addition to the powers and duties of the agencies listed in section 41‑1953, subsection E, the department shall:

1. Administer the following services:

(a) Employment services, which shall include manpower programs and work training, field operations, technical services, unemployment compensation, community work and training and other related functions in furtherance of programs under the social security act, as amended, the Wagner‑Peyser act, as amended, the federal unemployment tax act, as amended, 33 United States Code, the family support act of 1988 (P.L. 100‑485) and other related federal acts and titles.

(b) Individual and family services, which shall include a section on aging, services to children, youth and adults and other related functions in furtherance of social service programs under the social security act, as amended, title IV, grants to states for aid and services to needy families with children and for child‑welfare services, title XX, grants to states for services, the older Americans act, as amended, the family support act of 1988 (P.L. 100‑485) and other related federal acts and titles.

(c) Income maintenance services, which shall include categorical assistance programs, special services unit, child support collection services, establishment of paternity services, maintenance and operation of a state case registry of child support orders, a state directory of new hires, a support payment clearinghouse and other related functions in furtherance of programs under the social security act, title IV, grants to states for aid and services to needy families with children and for child‑welfare services, title XX, grants to states for services, as amended, and other related federal acts and titles.

(d) Rehabilitation services, which shall include vocational rehabilitation services and sections for the blind and visually impaired, communication disorders, correctional rehabilitation and other related functions in furtherance of programs under the vocational rehabilitation act, as amended, the Randolph‑Sheppard act, as amended, and other related federal acts and titles.

(e) Administrative services, which shall include the coordination of program evaluation and research, interagency program coordination and in‑service training, planning, grants, development and management, information, legislative liaison, budget, licensing and other related functions.

(f) Manpower planning, which shall include a state manpower planning council for the purposes of the federal‑state‑local cooperative manpower planning system and other related functions in furtherance of programs under the comprehensive employment and training act of 1973, as amended, and other related federal acts and titles.

(g) Economic opportunity services, which shall include the furtherance of programs prescribed under the economic opportunity act of 1967, as amended, and other related federal acts and titles.

(h) Intellectual disability and other developmental disability programs, with emphasis on referral and purchase of services. The program shall include educational, rehabilitation, treatment and training services and other related functions in furtherance of programs under the developmental disabilities services and facilities construction act, Public Law 91‑517, and other related federal acts and titles.

(i) Nonmedical home and community based services and functions, including department designated case management, housekeeping services, chore services, home health aid, personal care, visiting nurse services, adult day care or adult day health, respite sitter care, attendant care, home delivered meals and other related services and functions.

2. Provide a coordinated system of initial intake, screening, evaluation and referral of persons served by the department.

3. Adopt rules it deems necessary or desirable to further the objectives and programs of the department.

4. Formulate policies, plans and programs to effectuate the missions and purposes of the department.

5. Employ, determine the conditions of employment and prescribe the duties and powers of administrative, professional, technical, secretarial, clerical and other persons subject to chapter 4, article 4 and, as applicable, article 5 of this title as may be necessary in the performance of its duties, contract for the services of outside advisors, consultants and aides as may be reasonably necessary and reimburse department volunteers, designated by the director, for expenses in transporting clients of the department on official business.

6. Make contracts and incur obligations within the general scope of its activities and operations subject to the availability of funds.

7. Contract with or assist other departments, agencies and institutions of the state, local and federal governments in the furtherance of its purposes, objectives and programs.

8. Be designated as the single state agency for the purposes of administering and in furtherance of each federally supported state plan.

9. Accept and disburse grants, matching funds and direct payments from public or private agencies for the conduct of programs that are consistent with the overall purposes and objectives of the department.

10. Provide information and advice on request by local, state and federal agencies and by private citizens, business enterprises and community organizations on matters within the scope of its duties subject to the departmental rules on the confidentiality of information.

11. Establish and maintain separate financial accounts as required by federal law or regulations.

12. Advise and make recommendations to the governor and the legislature on all matters concerning its objectives.

13. Have an official seal that shall be judicially noticed.

14. Annually estimate the current year's population of each county, city and town in this state, using the periodic census conducted by the United States department of commerce, or its successor agency, as the basis for such estimates and deliver such estimates to the economic estimates commission before December 15.

15. Estimate the population of any newly annexed areas of a political subdivision as of July 1 of the fiscal year in which the annexation occurs and deliver such estimates as promptly as is feasible after the annexation occurs to the economic estimates commission.

16. Establish and maintain a statewide program of services for persons who are both hearing impaired and visually impaired and coordinate appropriate services with other agencies and organizations to avoid duplication of these services and to increase efficiency. The department of economic security shall enter into agreements for the utilization of the personnel and facilities of the department of economic security, the department of health services and other appropriate agencies and organizations in providing these services.

17. Establish and charge fees for deposit in the department of economic security prelayoff assistance services fund to employers who voluntarily participate in the services of the department that provide job service and retraining for persons who have been or are about to be laid off from employment. The department shall charge only those fees necessary to cover the costs of administering the job service and retraining services.

18. Establish a focal point for addressing the issue of hunger in Arizona and provide coordination and assistance to public and private nonprofit organizations that aid hungry persons and families throughout this state. Specifically such activities shall include:

(a) Collecting and disseminating information regarding the location and availability of surplus food for distribution to needy persons, the availability of surplus food for donation to charity food bank organizations, and the needs of charity food bank organizations for surplus food.

(b) Coordinating the activities of federal, state, local and private nonprofit organizations that provide food assistance to the hungry.

(c) Accepting and disbursing federal monies, and any state monies appropriated by the legislature, to private nonprofit organizations in support of the collection, receipt, handling, storage and distribution of donated or surplus food items.

(d) Providing technical assistance to private nonprofit organizations that provide or intend to provide services to the hungry.

(e) Developing a state plan on hunger that, at a minimum, identifies the magnitude of the hunger problem in this state, the characteristics of the population in need, the availability and location of charity food banks and the potential sources of surplus food, assesses the effectiveness of the donated food collection and distribution network and other efforts to alleviate the hunger problem, and recommends goals and strategies to improve the status of the hungry. The state plan on hunger shall be incorporated into the department's state comprehensive plan prepared pursuant to section 41‑1956.

(f) Establishing a special purpose advisory council on hunger pursuant to section 41‑1981.

19. Establish an office to address the issue of homelessness and to provide coordination and assistance to public and private nonprofit organizations that prevent homelessness or aid homeless individuals and families throughout this state. These activities shall include:

(a) Promoting and participating in planning for the prevention of homelessness and the development of services to homeless persons.

(b) Identifying and developing strategies for resolving barriers in state agency service delivery systems that inhibit the provision and coordination of appropriate services to homeless persons and persons in danger of being homeless.

(c) Assisting in the coordination of the activities of federal, state and local governments and the private sector that prevent homelessness or provide assistance to homeless people.

(d) Assisting in obtaining and increasing funding from all appropriate sources to prevent homelessness or assist in alleviating homelessness.

(e) Serving as a clearinghouse on information regarding funding and services available to assist homeless persons and persons in danger of being homeless.

(f) Developing an annual state comprehensive homeless assistance plan to prevent and alleviate homelessness.

(g) Submitting an annual report to the governor, the president of the senate and the speaker of the house of representatives on the status of homelessness and efforts to prevent and alleviate homelessness.

20. Cooperate with the Arizona‑Mexico commission in the governor's office and with researchers at universities in this state to collect data and conduct projects in the United States and Mexico on issues that are within the scope of the department's duties and that relate to quality of life, trade and economic development in this state in a manner that will help the Arizona‑Mexico commission to assess and enhance the economic competitiveness of this state and of the Arizona‑Mexico region.

B. If the department of economic security has responsibility for the care, custody or control of a child or is paying the cost of care for a child, it may serve as representative payee to receive and administer social security and United States department of veterans affairs benefits and other benefits payable to such child. Notwithstanding any law to the contrary, the department of economic security:

1. Shall deposit, pursuant to sections 35‑146 and 35‑147, such monies as it receives to be retained separate and apart from the state general fund on the books of the department of administration.

2. May use such monies to defray the cost of care and services expended by the department of economic security for the benefit, welfare and best interests of the child and invest any of the monies that the director determines are not necessary for immediate use.

3. Shall maintain separate records to account for the receipt, investment and disposition of funds received for each child.

4. On termination of the department of economic security's responsibility for the child, shall release any funds remaining to the child's credit in accordance with the requirements of the funding source or in the absence of such requirements shall release the remaining funds to:

(a) The child, if the child is at least eighteen years of age or is emancipated.

(b) The person responsible for the child if the child is a minor and not emancipated.

C. Subsection B of this section does not pertain to benefits payable to or for the benefit of a child receiving services under title 36.

D. Volunteers reimbursed for expenses pursuant to subsection A, paragraph 5 of this section are not eligible for workers' compensation under title 23, chapter 6.

E. In implementing the temporary assistance for needy families program pursuant to Public Law 104‑193, the department shall provide for cash assistance to two parent families if both parents are able to work only on documented participation by both parents in work activities described in title 46, chapter 2, article 5, except that payments may be made to families who do not meet the participation requirements if:

1. It is determined on an individual case basis that they have emergency needs.

2. The family is determined to be eligible for diversion from long‑term cash assistance pursuant to title 46, chapter 2, article 5.

F. The department shall provide for cash assistance under temporary assistance for needy families pursuant to Public Law 104‑193 to two parent families for no longer than six months if both parents are able to work, except that additional assistance may be provided on an individual case basis to families with extraordinary circumstances. The department shall establish by rule the criteria to be used to determine eligibility for additional cash assistance.

G. The department shall adopt the following discount medical payment system for persons who the department determines are eligible and who are receiving rehabilitation services pursuant to subsection A, paragraph 1, subdivision (d) of this section:

1. For inpatient hospital admissions and outpatient hospital services the department shall reimburse a hospital according to the rates established by the Arizona health care cost containment system administration pursuant to section 36‑2903.01, subsection G.

2. The department's liability for a hospital claim under this subsection is subject to availability of funds.

3. A hospital bill is considered received for purposes of paragraph 5 of this subsection on initial receipt of the legible, error‑free claim form by the department if the claim includes the following error‑free documentation in legible form:

(a) An admission face sheet.

(b) An itemized statement.

(d) A discharge summary or an interim summary if the claim is split.

(e) An emergency record, if admission was through the emergency room.

(f) Operative reports, if applicable.

(g) A labor and delivery room report, if applicable.

4. The department shall require that the hospital pursue other third‑party payors before submitting a claim to the department. Payment received by a hospital from the department pursuant to this subsection is considered payment by the department of the department's liability for the hospital bill. A hospital may collect any unpaid portion of its bill from other third party payors or in situations covered by title 33, chapter 7, article 3.

5. For inpatient hospital admissions and outpatient hospital services rendered on and after October 1, 1997, if the department receives the claim directly from the hospital, the department shall pay a hospital's rate established according to this section subject to the following:

(a) If the hospital's bill is paid within thirty days of the date the bill was received, the department shall pay ninety‑nine per cent of the rate.

(b) If the hospital's bill is paid after thirty days but within sixty days of the date the bill was received, the department shall pay one hundred per cent of the rate.

(c) If the hospital's bill is paid any time after sixty days of the date the bill was received, the department shall pay one hundred per cent of the rate plus a fee of one per cent per month for each month or portion of a month following the sixtieth day of receipt of the bill until the date of payment.

6. For medical services other than those for which a rate has been established pursuant to section 36‑2903.01, subsection G, the department shall pay according to the Arizona health care cost containment system capped fee‑for‑service schedule adopted pursuant to section 36‑2904, subsection K J or any other established fee schedule the department determines reasonable.

H. The department shall not pay claims for services pursuant to this section that are submitted more than nine months after the date of service for which the payment is claimed.

I. To assist in the location of persons or assets for the purpose of establishing paternity, establishing, modifying or enforcing child support obligations and other related functions, the department has access, including automated access if the records are maintained in an automated database, to records of state and local government agencies, including:

1. Vital statistics, including records of marriage, birth and divorce.

2. State and local tax and revenue records, including information on residence address, employer, income and assets.

3. Records concerning real and titled personal property.

4. Records of occupational and professional licenses.

5. Records concerning the ownership and control of corporations, partnerships and other business entities.

6. Employment security records.

7. Records of agencies administering public assistance programs.

8. Records of the motor vehicle division of the department of transportation.

9. Records of the state department of corrections.

10. Any system used by a state agency to locate a person for motor vehicle or law enforcement purposes, including access to information contained in the Arizona criminal justice information system.

J. Notwithstanding subsection I of this section, the department or its agents shall not seek or obtain information on the assets of an individual unless paternity is presumed pursuant to section 25‑814 or established.

K. Access to records of the department of revenue pursuant to subsection I of this section shall be provided in accordance with section 42‑2003.

L. The department also has access to certain records held by private entities with respect to child support obligors or obligees, or individuals against whom such an obligation is sought. The information shall be obtained as follows:

1. In response to a child support subpoena issued by the department pursuant to section 25‑520, the names and addresses of these persons and the names and addresses of the employers of these persons, as appearing in customer records of public utilities and cable television companies.

2. Information on these persons held by financial institutions.

M. Pursuant to department rules, the department may compromise or settle any support debt owed to the department if the director or an authorized agent determines that it is in the best interest of the state and after considering each of the following factors:

1. The obligor's financial resources.

2. The cost of further enforcement action.

3. The likelihood of recovering the full amount of the debt.

N. Notwithstanding any law to the contrary, a state or local governmental agency or private entity is not subject to civil liability for the disclosure of information made in good faith to the department pursuant to this section. END_STATUTE

Sec. 28. Healthcare group enrollment; retroactivity

A. Beginning August 1, 2013, the Arizona healthcare cost containment system administration shall not enroll new members, including businesses and employees who are being added to a members health plan, in the healthcare group program.

B. Subsection A of this section is effective retroactively to from and after July 30, 2013.

Sec. 29. Effective date

Sections 8-142.01, 8-512, 11-292, 12-262, 22-117, 36-774, 36-2901, 36‑2901.05, 36‑2903, 36-2903.01, 36-2904, 36-2906, 36-2907, 36-2907.10, 36‑2907.11, 36-2909, 36‑2913, 36‑2928, 36-2986, 36-2987, 36-3411 and 41-1954, Arizona Revised Statutes, as amended by this act, are effective from and after December 31, 2013.