January 16, 2013, Introduced by Senators CASWELL and JANSEN and referred to the Committee on Health Policy.
A bill to amend 1978 PA 368, entitled
"Public health code,"
(MCL 333.1101 to 333.25211) by adding section 17771.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 17771. (1) Subject to this section, a health benefit
payer may conduct an audit of a pharmacy in this state. A health
benefit payer that conducts an audit of a pharmacy in this state
shall do all of the following:
(a) In its pharmacy contract, identify and describe in detail
the audit procedures. A health benefit payer shall update its
pharmacy contract and communicate any changes to the pharmacy as
changes to the contract occur.
(b) Provide written notice to the pharmacy at least 2 weeks
before initiating and scheduling the initial on-site audit for each
audit cycle. A health benefit payer shall not initiate or schedule
an on-site audit during the first 5 calendar days of a month,
holiday time frames, weekends, or Mondays unless otherwise
consented to by the pharmacist. A health benefit payer shall be
flexible in initiating and scheduling an audit at a time that is
reasonably convenient to the pharmacy and the health benefit payer.
(c) Utilize every effort to minimize inconvenience and
disruption to pharmacy operations during the audit process. A
health benefit payer that conducts an audit of a pharmacy in this
state shall not interfere with the delivery of pharmacy services to
a patient.
(d) Conduct an audit that involves clinical or professional
judgment by or in consultation with a pharmacist licensed in this
state.
(e) Subject to the requirements of this article, for the
purpose of validating a pharmacy record with respect to orders or
refills, allow the use of hospital or physician records that are
written or that are transmitted or stored electronically, including
file annotations, document images, and other supporting
documentation that are date- and time-stamped.
(f) Base any finding of an overpayment or underpayment on the
actual overpayment or underpayment of claims.
(g) Base any recoupment or payment adjustments of claims on a
calculation that is reasonable and proportional in relation to the
type of error detected.
(h) If there is a finding of an underpayment, reimburse the
pharmacy as soon as possible after detection.
(i) Conduct its audit of each pharmacy under the same sampling
standards, parameters, and procedures as other similarly licensed
pharmacies audited by the health benefit payer. The health benefit
payer shall provide to the pharmacy samples of the standard
parameters and procedures for the audit being conducted.
(j) Except as otherwise provided in this subdivision, audit
only claims submitted or adjudicated within the 2-year period
immediately preceding the initiation of the audit unless a longer
period is permitted under federal or state law. This subdivision
does not apply under any of the following circumstances:
(i) When a health benefit payer must return to a pharmacy to
complete an audit already in progress.
(ii) If there is a documented pattern of payment error
sustained by that pharmacy throughout the audited period.
(iii) If there is inappropriate or illegal activity that the
health benefit payer has brought to the attention of the pharmacy
owner or corporate headquarters of the pharmacy.
(k) Not receive payment based on risk- or incentive-based
auditing.
(l) Not include the dispensing fee amount in a finding of an
overpayment.
(2) Upon completion of an audit of a pharmacy, the health
benefit payer shall do all of the following:
(a) Deliver a preliminary written audit report to the pharmacy
on or before the expiration of 120 days after the completion of the
audit, with reasonable extensions allowed. The preliminary written
audit report shall include contact information for the auditing
entity and a description of the appeal process developed under
subsection (3).
(b) Allow the pharmacy not less than 60 days following its
receipt of the preliminary report under subdivision (a) to produce
documentation to address any discrepancy found during the audit.
(c) If an appeal is not filed under subsection (3), deliver a
final written audit report to the pharmacy on or before the
expiration of 6 months after the time period described in
subdivision (b) has elapsed. If an appeal is filed under subsection
(3), deliver a final written audit report to the pharmacy on or
before the expiration of 6 months after the conclusion of the
appeal. The final written audit report shall include contact
information for the auditing entity and be signed by and include
the signature of any pharmacist participating in the audit.
(d) Except as otherwise provided in this subdivision, only
recoup disputed funds or overpayments or restore underpayments
after the final written audit report is delivered to the pharmacy
under subdivision (c). The benefit payer shall restore
underpayments to the pharmacy in the next payment cycle. If the
preliminary written audit report under subdivision (a) discloses a
discrepancy that exceeds $20,000.00 in overpayment, a health
benefit payer may withhold future payments to the pharmacy during
the period beginning on the date the preliminary audit report is
delivered to the pharmacy under subdivision (a) through the date
the audit is finalized under subdivision (c).
(e) Disclose to the sponsor of the health care payment or
benefits program any money recouped through the audit process.
(f) Provide to the sponsor of the health care payment or
benefits program a copy of the final written audit report delivered
to the pharmacy under subdivision (c).
(3) The commissioner of the office of financial and insurance
regulation shall establish an appeals process for the conduct
before a neutral party of an appeal of an audit report prepared
under this section. The evaluation of claims submission and product
size disputes in an appeal under this subsection shall be based
upon standards developed by the national council for prescription
drug programs or any other recognized national industry standard
approved by the commissioner. If, following an appeal, the appealed
portion of the audit report is unsubstantiated, the health benefit
payer shall dismiss the portion of the audit report in question
without the necessity of any further action.
(4) The health benefit payer shall not conduct an
extrapolation audit in calculating recoupments, restoration, or
penalties for an audit under this section. For the purposes of this
subsection, an extrapolation audit is an audit of a sample of
prescription drug benefit claims submitted by a pharmacy to the
health benefit payer that is then used to estimate audit results
for a larger batch or group of claims not reviewed during the
audit. A health benefit payer shall base audit conclusions on 1 or
more of the following statistical considerations:
(a) The audit sample shall consist of randomly selected
prescriptions with dates of service included within the stated
audit period.
(b) Claims in the sample for which a pharmacy was underpaid
shall be considered as well as any claims in the sample involving
overpayments.
(c) The sample shall not include solely high-priced
medications or a preponderance of the same drug item.
(d) The sample size shall be appropriate and consistent with
established scientific principles assuring protection against
selection bias.
(e) The standard deviation or the standard error employed by
the specific auditing methodology shall be defined and consistent
with commonly accepted scientific principles.
(f) If there is an impasse occurring over methodology, sample
size, or randomness that accompanies an audit conclusion, the
decision of the office of financial and insurance regulation in
consultation with a qualified statistician is final.
(5) Any clerical or record-keeping error, including a
typographical error, a scrivener's error, or a computer error,
regarding a required document or record that is found during an
audit under this section does not, on its face, constitute fraud.
An error described in this subsection does not subject the
individual involved to criminal penalties without proof of intent
to commit fraud. An error described in this subsection may be
subject to recoupment.
(6) The audit criteria set forth in this section apply only to
audits of claims for services provided and claims submitted for
payment after October 1, 2013.
(7) This section does not apply to any of the following:
(a) A health benefit payer pharmacy audit or investigative
audit conducted by or on behalf of a state agency that involves
fraud, willful misrepresentation, or abuse, including without
limitation investigative audits or any other statutory provision
that authorizes investigation relating to insurance fraud.
(b) An audit based on a criminal investigation.
(8) This section does not impair or supersede a provision
regarding health benefit payer pharmacy audits in the insurance
code of 1956, 1956 PA 218, MCL 500.100 to 500.8302, or the
nonprofit health care corporation reform act, 1980 PA 350, MCL
550.1101 to 550.1704. If any provision of this section conflicts
with a provision of the insurance code of 1956, 1956 PA 218, MCL
500.100 to 500.8302, or the nonprofit health care corporation
reform act, 1980 PA 350, MCL 550.1101 to 550.1704, with regard to
health benefit payer pharmacy audits, the applicable provision in
the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302,
or the nonprofit health care corporation reform act, 1980 PA 350,
MCL 550.1101 to 550.1704, controls.
(9) As used in this section:
(a) "Claim" means any attempt to cause an entity to make a
payment to cover a health care benefit under a health care payment
or benefits program.
(b) "Health benefit payer" means a public or private entity
that offers, provides, administers, or manages a health care
payment or benefits program, including, but not limited to, all of
the following:
(i) A health insurer or any insurance company authorized to
provide health insurance in this state.
(ii) A nonprofit health care corporation.
(iii) A health maintenance organization.
(iv) A preferred provider organization.
(v) A nonprofit dental care corporation.
(vi) The medical services administration in the department of
community health.
(vii) A pharmacy benefit manager.
(viii) A legal entity that is self-insured and providing health
care benefits to its employees.
(ix) A responsible party.
(x) A person acting for an entity described in subparagraphs
(i) to (ix) in a contractual relationship in the performance of any
activity on behalf of the entity described in subparagraphs (i) to
(viii).
(c) "Health care benefit" means the right under a health care
payment or benefits program to have a payment made by a health
benefit payer for a specified health care service.
(d) "Health care payment or benefits program " means an
expense-incurred hospital, medical, or surgical policy or
certificate, nonprofit health care corporation certificate, health
maintenance organization contract, and any other plan or program of
health care benefits that provides coverage for or administers
coverage for prescription drugs or devices.
(e) "Pharmacy benefit manager" means a person, business, or
other legal entity that orchestrates the development of the
pharmacy network and adjudicates claims for a health benefit payer.
(f) "Responsible party" means an entity that is responsible
for the payment of claims for health care benefits under a health
care payment or benefits program.