BILL REQ. #:  S-2309.2 

READ FIRST TIME 02/28/07.   

     AN ACT Relating to the department of social and health services' technical assistance and audit program for pharmacy payments; amending RCW 74.09.200; adding new sections to chapter 74.09 RCW; and creating new sections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 74.09.200 and 1979 ex.s. c 152 s 1 are each amended to read as follows:
     (1) The legislature finds and declares it to be in the public interest and for the protection of the health and welfare of the residents of the state of Washington that a proper regulatory and inspection program be instituted in connection with the providing of medical, dental, and other health services to recipients of public assistance and medically indigent persons. In order to effectively accomplish such purpose and to assure that the recipient of such services receives such services as are paid for by the state of Washington, the acceptance by the recipient of such services, and by practitioners of reimbursement for performing such services, shall authorize the secretary of the department of social and health services or his designee, to inspect and audit all records in connection with the providing of such services.
     (2) It is the intent of the legislature that the regulatory and inspection program authorized in this section shall include:
     (a) A technical assistance program to identify pharmacies that could benefit from technical assistance from the department with regard to billing for payment, and to provide that assistance; and
     (b) A systematic method to gather data for program improvement.

NEW SECTION.  Sec. 2   A new section is added to chapter 74.09 RCW to read as follows:
     (1) The secretary or his or her authorized representative shall develop and implement a program of technical assistance to pharmacies providing services under this chapter that:
     (a) Offers education to pharmacies regarding compliance with the payment requirements for programs under this chapter; and
     (b) Offers technical assistance to pharmacies that request such assistance or who, as identified in a prepayment or other preaudit review, would benefit from such assistance.
     (2) The department may order a pharmacy to comply with a corrective plan if, during technical assistance or prepayment or other preaudit review, a pattern of technical deficiencies is identified. If the pharmacy fails to comply with the corrective plan, the pharmacy may be referred for audit under this chapter.
     (3) The department shall develop a plan to incorporate into the provider payment system, by January 1, 2009, system capability to identify and report a pattern of technical deficiencies by pharmacies in making payment claims. Technical deficiencies identified by this system may be used to determine pharmacies to which technical assistance will be offered. The department must report to the appropriate committees of the legislature by January 1, 2008, and September 1, 2008, on the progress made to implement this system requirement.
     (4) As used in this section, "technical deficiency" means the same as defined in section 3 of this act.

NEW SECTION.  Sec. 3   A new section is added to chapter 74.09 RCW to read as follows:
     (1) Audits under this chapter of the records of pharmacies licensed under chapter 18.64 RCW are subject to the following:
     (a) The period covered by the audit may not exceed one year from the date a claim was submitted to the department for payment unless the department has evidence of sustained payment error or a pharmacy has failed to follow corrective action from a previous audit, in which case the department may look back as far as necessary to determine the degree of payment error;
     (b) Entities conducting audits pursuant to a contract with the department must maintain an office within this state as a point of contact for pharmacies being audited;
     (c) An initial audit may not commence earlier than thirty days prior to the date on which notice of the audit is given to the pharmacy. The notice must be provided to the physical location at which the audit will be conducted and to the principal office or place of business of the pharmacy, if different, and must include the name, Washington office address, and telephone number of any contractor conducting the audit pursuant to a contract with the department. Audit findings resulting from audit work that is commenced before the thirty-day period may not be used in any audit findings;
     (d)(i) Except as provided in (d)(ii) of this subsection, technical deficiencies may not be the basis for finding an overpayment if the pharmacy can substantiate through documentation that the services or goods were provided to the recipient and that the technical deficiency did not adversely affect direct patient care of the recipient, unless recoupment of the payment is specifically mandated in state or federal law or rule or failure to recoup payment will result in the loss of federal matching funds or other penalty against the state; and
     (ii) In response to an audit finding technical deficiencies, including a pattern of noncompliance with technical requirements, the department may order the pharmacy to comply with a corrective plan. If the pharmacy fails to comply with the corrective plan, action to recoup overpayments may be taken based on technical deficiencies;
     (e) An audited pharmacy may use the written records of a hospital, physician, or other authorized pharmacy to validate the audited pharmacy's record;
     (f) Extrapolation may not be used to determine overpayment amounts to be recovered by recoupment, offset, or otherwise, unless the secretary determines that there is a sustained or high level of payment error or documented technical assistance has failed to correct the payment error;
     (g) The pharmacy must be given at least: (i) Sixty days from the date that the on-site audit is complete to provide missing files or records; and (ii) ninety days from the date on which the draft audit findings were delivered to the pharmacy to respond with additional documentation or other relevant information. Extensions of these time periods shall be granted for good cause; and
     (h) A final audit report must be delivered to the pharmacy within one hundred eighty days after delivering a draft audit report to the pharmacy or after the close of a dispute conference, whichever occurs later. If extensions of time are granted to the pharmacy under (g) of this subsection, the time period for delivery of the final audit report shall include the additional days allowed for the extension. An audit report delivered after the time period specified in this subsection must be deemed to be a draft audit report.
     (2) The department shall remit any overpayments, fines, and interest recovered from pharmacy audits to the state's health services account. The federal government's share of recovered overpayments shall be repaid immediately.
     (3) This section does not apply to an audit that is based on an investigation for fraudulent or abusive practices under RCW 74.09.210.
     (4) For the purposes of this section:
     (a) "Draft audit report" includes any audit which contains findings not previously contained in an audit report delivered to the pharmacy.
     (b) "Technical deficiency" means an error or omission in documentation by a pharmacy that does not affect direct patient care of, or receipt of services by, the recipient, but does not include:
     (i) Lack of medical necessity or failure to document medical necessity in a manner that meets professionally recognized applicable standards of care;
     (ii) Failure to provide care of a quality that meets professionally recognized standards of care;
     (iii) Failure to routinely obtain prior authorization of the service if required under this chapter or rules adopted under this chapter; or
     (iv) Fraud, a pattern of abusive billing or noncompliance, or a gross or flagrant violation.

NEW SECTION.  Sec. 4   The secretary of the department of social and health services may adopt rules as necessary to implement this act.

NEW SECTION.  Sec. 5   Section 3 of this act applies retroactively to audits commenced by the department of social and health services under chapter 74.09 RCW on or after April 1, 2007.

NEW SECTION.  Sec. 6   If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.