CHA News Article

DMHC Releases Guidance on General Licensure Regulation
For CEOs, CFOs, Government Relations Executives

The Department of Managed Health Care (DMHC) has released final guidance on its Knox-Keene licensure regulation, which applies to any contract entered into, amended, or renewed on or after July 1. The regulation, among other things, defines various types of risk and requires entities that assume any amount of global risk to either obtain a license under the Knox-Keene Health Care Service Plan Act of 1975 or receive an exemption from DMHC. 

While similar to the draft guidance released in May, the final guidance adds two types of contracts to the list of presumptive exemptions:

  • Contracts for professional services provided in a hospital emergency department
  • Agreements between a DMHC-licensed health plan and a provider for professional capitation only – where, under the Division of Financial Responsibility, the provider assumes financial responsibility for professional services that may be provided in a hospital facility (e.g., radiation therapy, hemodialysis, chemotherapy, amniocentesis, imaging services)

Other notable differences include:

  • Extension of the exemption period during the phase-in period to either the term of the contract or two years, depending on whether a licensed health plan is a party to the contract
  • Clarification that requests for exemptions may be submitted on behalf of an entity or on behalf of other parties to a contract (e.g., a hospital submitting the contracts of the provider groups with whom it contracts)
  • Clarification that organizations may submit multiple contracts in one submission
  • Clarification that — for all contracts involving any amount of global risk (other than those discussed above) that an entity enters into or renews between July 1, 2019, and June 30, 2020 — the entity or someone acting on the entity’s behalf must submit a Request for Expedited Exemption to DMHC within 30 days after all parties have executed the contract or renewal, or 30 days after the effective date of the contract or renewal, whichever is later
  • Clarification that non-substantive contract amendments do not need to be filed

CHA previously submitted comments on the draft guidance. Members should consult with their counsel to determine how the new regulation will impact their organization. CHA is sponsoring legislation — Senate Bill 714 (Umberg, D-Orange County) — that would give providers greater certainty around the exemption process and would presumptively exempt from licensure certain low-risk payment arrangements that fall below quantitative risk thresholds.

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