NEW SECTION. Sec. 1. (1) The legislature finds that the state of Washington has substantial public interest in the quality, price, and cost of health care, and ensuring that managed care organizations are delivering quality health care. Oversight of performance management of managed care organizations providing health care services to medicaid clients contracted by the health care authority is necessary in order to provide accountability for state purchased health care.

(2) The legislature further finds that health care costs are rising, and that containing health care costs while ensuring positive health outcomes, appropriate performance management, and accountability for dollars spent on state purchased health care is essential. The legislature must hold both the health care authority and the managed care organizations that provide services to medicaid clients accountable for performance and performance improvement.

(3) The legislature therefore intends to ensure medicaid clients receive appropriate care in the right setting, at the right time, for the right cost, by providing appropriate oversight for performance management and accountability for state purchased health care.

(1) The authority shall incorporate the expected outcomes and criteria to measure the performance of service coordination organizations as provided in chapter 70.320 RCW into contracts with managed care organizations that provide services to clients under this chapter.

(2)(a) The authority shall contract with an external quality improvement organization to annually analyze the performance of managed care organizations providing services to clients under this chapter in comparison to managed care organizations in other states, based on performance outcomes in each performance measure.

(b) Beginning November 15, 2019, and annually thereafter, the external quality improvement organization must report its findings to the authority, the governor, and the legislature.

(3)(a) Beginning in plan year 2020, a percentage of the plan year funding appropriated to each managed care organization that provides services to clients under this chapter must be made contingent on the managed care organization ranking at or above the fiftieth percentile nationally in the performance measures. For each performance measure that a managed care organization performs at or below the fiftieth percentile nationally during a plan year, the managed care organization must remit one percent of the managed care organization's appropriated funding for that plan year back to the authority. The authority shall notify managed care organizations of any required remissions of funding for the preceding plan year no later than January 30th of each year.

(b) The authority may waive the requirement of a managed care organization to remit funding back to the authority pursuant to (a) of this subsection, if the managed care organization demonstrates to the authority adequate reasons for missing a performance target and a plan to achieve the performance measure target in the new plan year.

(ii) The authority may waive the requirement to remit funding under this subsection no more than once every five years for remission related to failure to rank at or above the fiftieth percentile nationally in the same performance measure.

(a) "External quality improvement organization" means an organization that meets the competence and independence requirements under 42 C.F.R. Sec. 438.354.