SECTIONS 14450-14464 - California Statutes

WELFARE AND INSTITUTIONS CODE

SECTION 14450-14464

14450. (a) No contract between the department and a prepaid health
plan shall be approved or renewed unless the providers and the
facilities of the prepaid health plan meet the Medi-Cal program
standards for participation as established by the director. In
addition, a prepaid health plan shall meet the standards required
pursuant to the provisions of the Knox-Keene Health Care Service Plan
Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division
2 of the Health and Safety Code), or the provisions of Chapter 11A
(commencing with Section 11491) of Part 2 of Division 2 of the
Insurance Code, as appropriate, standards specifically required by
federal law, and the following requirements:
(1) Each prepaid health plan shall establish a grievance procedure
under which enrollees may submit their grievances. The procedure
shall be approved by the department prior to the approval of the
contract. The department shall establish standards for the procedures
to insure adequate consideration and rectification of enrollee
grievances. A prepaid health plan shall make a finding of fact in the
case of each grievance processed, a copy of which shall be
transmitted to the enrollee. If the enrollee has an unresolved
grievance, the fair hearing provided in Chapter 7 (commencing with
Section 10950) of Part 2 shall be available to resolve all grievances
regarding care and administration by the prepaid health plan. The
findings and recommendations of the department, based on the decision
of the hearing officer, shall be binding upon the prepaid health
plan. Any changes in a proposed health plan's grievance procedure
must be approved by the department before the changes take effect.
(2) (A) Medi-Cal enrollees shall have the same responsibilities
and shall be entitled to the same rights as other enrollees with
regard to any requirements for arbitration as a condition of
membership in a health plan.
(B) Arbitration requirements shall be clearly disclosed in all of
the contractor's Medi-Cal marketing presentations, materials and
brochures, enrollment agreements, evidence of coverage, and
disclosure forms.
(3) The prepaid health plan shall provide the director, for his or
her approval, a plan for marketing its services to Medi-Cal
beneficiaries which relates the proposed service to the need for
services, and the size of the potential population to be served in
the proposed service area.
(4) The prepaid health plan shall demonstrate to the department
that it has adequate financial resources, administrative abilities
and soundness of program design to carry out its contractual
obligations.
(b) The requirements of this section shall apply to all managed
care plan contracts entered into under any of the following:
(1) The act that added this subdivision.
(2) Any of the following provisions of Chapter 7 (commencing with
Section 14000).
(A) Article 2.7 (commencing with Section 14087.3).
(B) Article 2.9 (commencing with Section 14088).
(C) Article 2.91 (commencing with Section 14490).
(3) Article 7 of Chapter 8 (commencing with Section 14490).

14450.5. (a) No contract between the department and a prepaid
health plan that is contracting with, or that is governed, owned, or
operated by, a county board of supervisors, shall be approved or
renewed unless the standards set forth in Section 1374.16 of the
Health and Safety Code are met. The treatment plan developed pursuant
to Section 1374.16 of the Health and Safety Code shall be consistent
with federal and state medicaid requirements. Nothing in Section
1374.16 of the Health and Safety Code is intended to alter or
abrogate any other requirements of federal or state law with regard
to medicaid.
(b) The requirements of this section shall apply to all managed
care plan contracts entered into under any of the following:
(1) The act that added this subdivision.
(2) Any of the following provisions of Chapter 7 (commencing with
Section 14000).
(A) Article 2.7 (commencing with Section 14087.3).
(B) Article 2.9 (commencing with Section 14088).
(C) Article 2.91 (commencing with Section 14089).
(3) Article 7 of Chapter 8 (commencing with Section 14490).

14451. Services under a prepaid health plan contract shall be
provided in accordance with the requirements of the Knox-Keene Health
Care Service Plan Act of 1975, or the requirements of Chapter 11A
(commencing with Section 11491) of Part 2 of Division 2 of the
Insurance Code, as appropriate.

14451.5. (a) A prepaid health plan contractor may not enter into
subcontracts when such an action would remove from the contractor his
obligation to bear a significant portion of the risk encountered in
providing the covered services.
(b) The prepaid health plan may obtain reinsurance for the cost of
providing covered services. Such reinsurance shall not limit the
contractor's liability below five thousand dollars ($5,000) per
enrollee for any one 12-month period, except that the contractor may
also obtain reinsurance for the total cost of services provided to
enrollees by noncontractor emergency service providers, and for 90
percent of all costs exceeding 115 percent of its income during any
contractor fiscal year.

14452. (a) All subcontracts shall be entered into pursuant to the
requirements of the Knox-Keene Health Care Service Plan Act of 1975,
or the requirements of Chapter 11A (commencing with Section 11491) of
Part 2 of Division 2 of the Insurance Code, as appropriate, and
federal law. All subcontracts shall be in writing, a copy of which
shall be transmitted to the department.
Each subcontract shall contain the amount of compensation or other
consideration which the subcontractor will receive under the terms
of the subcontract with the prepaid health plan; provided, however,
that these provisions shall not apply to a provider who is employed
or salaried by the prepaid health plan. A prepaid health plan shall
not enter into any subcontract in which consideration is determined
by a percentage of the primary contractor's payment from the
department. This subdivision shall not be construed to prohibit any
subcontract in which consideration is determined on a capitation
basis.
Subcontracts between a prepaid health plan and the subcontractor
shall be public records on file with the department. The names of the
officers and owners of the subcontractor, stockholders owning more
than 10 percent of the stock issued by the subcontractor, and major
creditors holding more than 5 percent of the debt of the
subcontractor shall be submitted by each prepaid health plan to the
department and shall be public records on file with the department.
(b) A prepaid health plan which is not a qualified health
maintenance organization pursuant to Title XIII of the federal Public
Health Service Act shall submit all provider and management
subcontracts to the department for approval prior to the subcontract
taking effect.
(c) Each subcontract shall require that the subcontractor make all
of its books and records, pertaining to the goods and services
furnished under the terms of the subcontract, available for
inspection, examination, or copying by the department during normal
working hours at the subcontractor's place of business, or at such
other mutually agreeable location in California.

14452.3. Each prepaid health plan shall provide the services of an
optometrist and ophthalmologist when the prepaid health plan contract
requires the provision of vision care services.
Vision care services shall be provided so that an enrollee may be
seen initially by either a physician or an optometrist.

14452.4. Where the prepaid health plan agrees to provide dental
services such services shall be provided in a manner that does not
require the enrollees to receive prior screening or authorization by
nondental personnel.

14452.5. Each prepaid health plan shall provide the services of a
psychologist and psychiatrist when the prepaid health plan contract
requires the provision of mental health services. Mental health
services shall be provided so that an enrollee may be seen initially
by either a physician or a psychologist, or by psychiatric social
workers under qualified supervision as otherwise allowed by law.

14452.6. Prepaid health plans, or their subcontractors, shall not
bill any enrollee for covered benefits provided under this chapter
and for which capitation has been paid, except as provided in Article
7 (commencing with Section 14490) of this chapter. Health care
providers shall not seek reimbursement from enrollees for any
services provided under this chapter.

14453. In compensating directors and officers, the prepaid health
plan shall not compensate at a rate substantially greater than the
prevailing charge for similar services in the community. For purposes
of this chapter, salaries or other compensation from the prepaid
health plan and its subcontractors, excluding reasonable expenses,
shall be considered as one.

14454. (a) The prepaid health plan shall be liable for all in-area
and out-of-area emergency services which are required by the contract
and rendered by a nonprepaid health plan provider. Payment for such
services shall include treatment of emergency conditions and shall
continue until such time as the enrollee may be transferred to any
provider of the prepaid health plan.
(b) Where a dispute arises between the prepaid health plan and the
nonprepaid health plan provider as to the liability of the prepaid
health plan for such services, the nonprepaid health plan provider
may submit the matter to the director for determination in the form
of a claim documenting as fully as reasonably possible the nature of
the emergency, the necessity for the treatment rendered, the
appropriateness of the length of stay for inpatient care, the reason
the patient could not have been transferred to a provider of the
prepaid health plan, and including any response by the prepaid health
plan to the claim which resulted in the dispute. The director shall,
by regulation, provide for resolution of the dispute in a timely
fashion and in a manner guaranteeing the procedural due process
requirements of the provisions of Chapter 5 (commencing with Section
11500), Part 1, Division 3, Title 2 of the Government Code, except
that the department shall use its own hearing officers. The hearing
officer may be assisted by a physician. To the extent feasible, the
director shall consolidate the claims of the nonprepaid health plan
provider against the prepaid health plan.
In no event, shall the prepaid health plan or the nonprepaid
health plan provider bill the enrollee for services which are or have
been the subject of review by the director pursuant to this section.
(c) If the director determines that the prepaid health plan is
liable for the emergency service, the plan shall reimburse the
nonprepaid health plan provider within 30 days. If the prepaid health
plan fails to reimburse the nonprepaid health plan provider within
30 days, the director shall arrange to set off the amount of the
unpaid claim or claims from no fewer than two future capitation
payments owed to the prepaid health plan by the department and the
department shall forward such setoff or setoffs to the nonprepaid
health plan provider. In making such arrangements to set off, the
director shall consult with the affected prepaid health plan in an
attempt to minimize the impact of such setoff or setoffs on cash
flow. When the claim of the nonprepaid health plan provider is
satisfied by setoff or setoffs, the director shall satisfy the claim
only with the funds of the prepaid health plan and shall in no event
use state funds to satisfy such a claim.
(d) Nothing in this section shall preclude prepaid health plans
and nonprepaid health plan providers from entering into voluntary
agreements to settle disputed claims for services by means of binding
arbitration or by other means acceptable to both parties.

14455. The prepaid health plan shall maintain a complete unit
medical record for each enrollee. Enrollee medical records shall also
include records of all treatment received from subcontractors. Such
records shall be maintained and preserved in a manner prescribed by
the director and shall be available for review by the department and
the United States Department of Health, Education, and Welfare.

14456. The department shall conduct annual medical audits of each
prepaid health plan unless the director determines there is good
cause for additional reviews.
The reviews shall use the standards and criteria established
pursuant to the Knox-Keene Health Care Service Plan Act of 1975, or
to Chapter 11A (commencing with Section 11491) of Part 2 of Division
2 of the Insurance Code, as appropriate. Except in those instances
where major unanticipated administrative obstacles prevent, or after
a determination by the director of good cause, the reviews shall be
scheduled and carried out jointly with reviews carried out pursuant
to the Knox-Keene Health Care Service Plan Act of 1975, or to Chapter
11A (commencing with Section 11491) of Part 2 of Division 2 of the
Insurance Code, as appropriate, if reviews under either act will be
carried out within time periods which satisfy the requirements of
federal law.
The department shall be authorized to contract with professional
organizations or the Department of Managed Health Care or the
Department of Insurance, as appropriate, to perform the periodic
review required by this section. The department, or its designee,
shall make a finding of fact with respect to the ability of the
prepaid health plan to provide quality health care services,
effectiveness of peer review, and utilization control mechanisms, and
the overall performance of the prepaid health plan in providing
health care benefits to its enrollees.

14456.5. (a) For purposes of this section, Medi-Cal managed care
plan means any prepaid health plan or Medi-Cal managed care plan
contracting with the department to provide services to enrolled
Medi-Cal beneficiaries under Chapter 7 (commencing with Section
14000) or this chapter, or Part 4 (commencing with Section 101525) of
Division 101 of the Health and Safety Code.
(b) The department shall ensure that coverage is provided for
medically necessary prescription medications and related medically
necessary medical services that are prescribed by a local mental
health plan provider, and are within the Medi-Cal scope of benefits,
but are excluded from coverage under Part 2.5 (commencing with
Section 5775) of Division 5, by doing, at least, all of the
following:
(1) Requiring Medi-Cal managed care plans to comply with the
following standards:
(A) The decision regarding responsibility and coverage for a
prescription drug shall be made by the Medi-Cal managed care plan
within 24 hours, or one business day, from the date the request for a
decision is received by telephone or other telecommunication device.
(B) The decision regarding responsibility and coverage for
services, such as laboratory tests, that are medically necessary
because of medications prescribed by a mental health provider, shall
be made by the Medi-Cal managed care plan within seven days following
the date the request for a decision is received by telephone or
other telecommunication device.
(C) If the decision of the Medi-Cal managed care plan on the
request is a deferral because of a determination that the Medi-Cal
managed care plan needs more information, the Medi-Cal managed care
plan shall transmit notice of the deferral, by facsimile or by other
telecommunication system, to the pharmacist or other service
provider, to the prescribing mental health provider, and to a
designated mental health plan representative. The notice shall set
out with specificity what additional information is needed to make a
medical necessity determination.
(D) Any denial of authorization or payment for a prescription
medication or for any services such as laboratory tests that may be
medically necessary because of medications ordered by a mental health
plan provider shall set forth the reasons for the denial with
specificity. The denial notice shall be transmitted by facsimile or
other telecommunication system to the pharmacist or other service
provider, to the prescribing mental health provider, to a designated
mental health plan representative, and by mail to the Medi-Cal
beneficiary.
(E) For purposes of subsequent requests for a medication, the
local mental health plan provider prescribing the prescription
medication shall be treated as a plan provider under subdivision (a)
of Section 1367.22 of the Health and Safety Code.
(F) If the decision cannot be made within five working days
because of a request for additional information, any Medi-Cal managed
care plan licensed pursuant to Division 2 (commencing with Section
1340) of the Health and Safety Code shall inform the enrollee as
required by paragraph (5) of subdivision (h) of Section 1367.01 of
the Health and Safety Code. In regard to any Medi-Cal managed care
plan contract as described pursuant to subdivision (a) that is
issued, amended, or renewed on or after January 1, 2001, with a plan
not licensed pursuant to Division 2 (commencing with Section 1340) of
the Health and Safety Code, if the decision cannot be made within
five working days because of a request for additional information as
specified in subparagraph (C), the plan shall notify the enrollee, in
writing, that the plan cannot make a decision to approve, modify, or
deny the request for authorization. All managed care plans shall,
upon receipt of all information reasonably necessary for making the
decision and that was requested by the plan, approve, modify, or deny
the request for authorization within the timeframes specified in
subparagraph (A) or (B), whichever applies.
(2) In consultation with the Medi-Cal managed care plans, the
State Department of Mental Health, and local mental health plans
establishing a process to recognize credentialing of local mental
health plan providers, for the purpose of expediting approval of
medications prescribed by a local mental health plan provider who is
not contracting with the Medi-Cal managed care plan. In implementing
this requirement, the Medi-Cal managed care plan shall not be
required to violate licensure, accreditation, or certification
requirements of other entities.
(3) Requiring any Medi-Cal managed care plan to enter into a
memorandum of understanding with the local mental health plan. The
memorandum of understanding shall comply with applicable regulations.
(c) The department may sanction a Medi-Cal managed care plan for
violations of this section pursuant to Section 14088.23 or 14304.
(d) Every Medi-Cal managed care plan that provides prescription
drug benefits and that maintains one or more drug formularies shall
provide to members of the public, upon request, a copy of the most
current list of prescription drugs on the formulary of the Medi-Cal
managed care plan, by therapeutic category, with an indication of
whether any drugs on the list are preferred over other listed drugs.
If the Medi-Cal managed care plan maintains more than one formulary,
the plan shall notify the requester that a choice of formulary lists
is available.
(e) This section shall apply to any contracts entered into,
amended, modified, or extended on or after January 1, 2001.

14457. In addition to the reviews required or authorized by Section
14456, the department shall conduct periodic onsite visits or
additional visits after a determination by the director of good cause
by departmental representatives to include observation of the
general operation of the prepaid health plan, the condition of the
facilities for delivering health care, the availability of emergency
services, the degree of satisfaction of the enrollees, the operation
of the plan's grievance system, and the administrative and financial
aspects of the operation of the prepaid health plan.
Except when reviewing a plan's grievance system or marketing
activities, this evaluation shall use standards and criteria
established pursuant to the Knox-Keene Health Care Service Plan Act
of 1975, or to Chapter 11A (commencing with Section 11491) of Part 2
of Division 2 of the Insurance Code, as appropriate. Except in those
instances where major, unanticipated administrative obstacles
prevent, or after a determination by the director of good cause, the
visits shall be scheduled and carried out jointly with reviews
carried out pursuant to the Knox-Keene Health Care Service Plan Act
of 1975, or to Chapter 11A (commencing with Section 11491) of Part 2
of Division 2 of the Insurance Code, as appropriate, if reviews under
either act will be carried out within time periods which satisfy the
requirements of federal law.
The State Department of Health Services may contract with the
Department of Managed Health Care or the Department of Insurance, as
appropriate, to perform the periodic visits required by this section.

14458. The prepaid health plan shall establish procedures for
continuously reviewing the quality of care, performance of medical
personnel, the utilization of services and facilities, and costs.
Information derived from such review shall be made available to the
department.

14459. (a) The prepaid health plan shall maintain financial records
and shall have an annual audit or additional audits after a
determination by the director of good cause, performed by an
independent certified public accountant. A prepaid health plan
operated by a public entity shall have an annual audit performed in a
manner approved by the department. All certified financial
statements shall be filed with the department as soon as practical
after the end of the prepaid health plan's fiscal year and in any
event, within a period not to exceed 90 days thereafter. These
financial statements shall be filed with the department and shall be
public records. The department shall perform routine auditing of
prepaid health plan contractors and their affiliated subcontractors.
Except in those instances where major unanticipated obstacles
prevent, or after a determination by the director of good cause, the
audits shall be scheduled and carried out jointly with audits carried
out pursuant to the Knox-Keene Health Care Service Plan Act of 1975,
or to Chapter 11A (commencing with Section 11491) of Part 2 of
Division 2 of the Insurance Code, as appropriate, if audits under
either act are carried out within time periods which satisfy the
requirements of federal law. The department is authorized to contract
with the Department of Managed Health Care or the Department of
Insurance, as appropriate, to carry out the audits required by this
section. The prepaid health plan shall make all of its books and
records available for inspection, examination or copying by the
department during normal working hours at the prepaid health plan's
principal place of business or at such other place in California as
the department shall designate. For good cause, the department may
grant an exception to the time when annual financial statements are
to be submitted to the department. The annual report required in
Section 14313 shall include an itemization of expenditures made by
each prepaid health plan for the following categories of
expenditures: physician services, inpatient and outpatient hospital
services, pharmaceutical services and prescription drugs, dental
services, medical transportation services, vision care services,
mental health services, laboratory services, X-ray services, enrollee
education programs, marketing and enrollment costs, data-processing
costs, other administrative costs and health service expenditures and
any payments made to subcontractors, and the purposes of the
payments, including but not limited to, contributions to election
campaigns.
(b) The requirements of a financial and administrative review by
the department of any health care service plan licensed by the
Director of the Department of Managed Health Care pursuant to Chapter
2.2 (commencing with Section 1340) of Division 2 of the Health and
Safety Code may be waived upon submission of the financial audit for
the same period conducted by the Department of Managed Health Care
pursuant to Section 1382 of the Health and Safety Code.

14459.5. (a) As delegated by the federal government, the department
has responsibility for monitoring the quality of all medicaid
services provided in the state. A key component of this monitoring
function is the performance of annual, independent, external reviews
of the quality of services furnished under each state contract with a
health maintenance organization, as specified by the federal Health
Care Financing Administration.
(b) The Legislature finds and declares that the final report
obtained from the external reviews will provide valid and reliable
information regarding health care outcomes and the overall quality of
care delivered by the managed care plans.
(c) The department shall make only the final report of each
external review available, within 30 calendar days of completion, to
the fiscal and health policy committees of the Legislature, and shall
make only the final report available for public viewing upon request
by any individual or organization.

14459.7. (a) The department shall implement a Management
Information System/Decision Support System (MIS/DSS) for the Medi-Cal
Program, that shall integrate data from managed care plans to
monitor and evaluate the quality of care provided to beneficiaries,
including access to services, establish provider rates, and analyze
ways to improve both the managed care and fee-for-service systems.
(b) The department shall provide the fiscal and health policy
committees of the Legislature with an annual progress and status
report on the implementation of the MIS/DSS. The annual progress and
status report shall include a description of the current status of
the project, including a list of the specific project objectives that
have and have not been met at the time of the report and a
comparison of the actual progress of the project with the most recent
project schedule approved by the Legislature. The report also shall
include estimated expenditures and staffing for the current fiscal
year and proposed expenditures and staffing for the next fiscal year
as well as a summary of cumulative total project expenditures to date
and a projection of future expenditures necessary to complete the
project.
(c) The department shall provide system or information access to
the fiscal and health policy committees of the Legislature, with the
most cost-effective technology available, by the conclusion of the
third phase of this multiphase project. Access shall include both the
management information system and ad hoc report systems, or their
equivalent, with safeguards to block access to individual patient
identities. Public access shall be provided to at least the
management information system summary presentation, or an equivalent,
by the time of project completion.

14460. A schedule of reviews, visits, and audits shall be jointly
established by the Department of Managed Health Care or the
Department of Insurance, as the case may be, and the State Department
of Health Services. Nothing in Section 14456, 14457, or 14459 shall
be construed to prohibit the State Department of Health Services from
conducting reviews, visits, or audits either jointly or
individually, for the purpose of following up on findings resulting
from reviews, visits, or audits carried out in accordance with this
chapter.

14461. Upon request by the department, each prepaid health plan
shall submit to the department a copy of any financial report
submitted to any other public or private organization, if such report
differs in content or format from any financial report already
submitted to the department.

14462. In accordance with Section 14081.5, the provisions of
Section 15459 of the Government Code shall not be applicable to a
hospital, whether or not it negotiates to obtain a contract pursuant
to Article 2.6 (commencing with Section 14081), if the hospital
predominantly serves or will predominantly serve members of a health
maintenance organization that has negotiated in good faith to obtain
a prepaid contract pursuant to this part or pursuant to Article 2.91
(commencing with Section 14089).

14463. (a) Except as otherwise provided in this chapter, each
prepaid health plan shall be responsible for all of the costs of
services rendered under the provisions of this chapter to any
Medi-Cal beneficiary enrolled in the plan.
(b) The department shall bear the costs of providing to each
Medi-Cal beneficiary enrolled in a prepaid health plan the services
covered under the plan, to the extent that the aggregate of these
costs, based on Medi-Cal reimbursement levels, and exclusive of
third-party recoveries, exceeds the 12-month risk limit. The risk
limit shall not exceed twenty-five thousand dollars ($25,000) based
on Medi-Cal reimbursement levels, shall be specified in the contract
between the department and the plan, and shall be determined
concurrently with the annual determination of rates of payment.
The department shall have the authority to adopt regulations to
increase the risk limit, to an amount not to exceed thirty-five
thousand dollars ($35,000). Regulations to increase the risk limit
shall be based upon and supported by changes in prepaid health plan
rates paid by the department and changes in the medical component of
the Consumer Price Index (CPI) as actuarially determined by the
department. It is the intent of the Legislature that these risk limit
adjustments are not to exceed thirty-five thousand dollars ($35,000)
until the 1986-87 fiscal year or beyond. For plans having contracts
in existence on the effective date of this section, the risk limit
shall be announced on or before the first day of each state fiscal
year, to become effective concurrently with the effective date for
the new rates of payment for the next succeeding state fiscal year.
The department may negotiate with a prepaid health plan a mutually
agreed-to risk limit in an amount in excess of thirty-five thousand
dollars ($35,000).
Within 90 days of the receipt of the documentation required under
paragraph (2), the department shall pay the reimbursement provided
for by this section to the extent that it determines that the
services rendered were medically necessary, and that the amount of
the payments sought for those services is reasonable. The department
may, if a dispute exists as to whether the services rendered were
medically necessary or if the amount of the payments for those
services was reasonable, delay paying the reimbursement for such
services until a final determination of the dispute is made.
(1) Each prepaid health plan shall arrange and provide initial
payment, at Medi-Cal reimbursement levels, for medically necessary
care for any Medi-Cal beneficiary enrolled in the plan when the cost
for this care exceeds the 12-month risk limit. No person shall be
disenrolled by any prepaid health plan for the sole reason that the
cost of his or her care under the plan has exceeded the risk limit.
(2) As a condition of reimbursement for costs of care in excess of
the risk limit as to a Medi-Cal beneficiary enrolled in a prepaid
health plan, the plan must submit to the department, in a format to
be designated by the department, documentation of all costs incurred
for services to the beneficiary during the 12-month period.
(c) No prepaid health plan may enter into any subcontract that
would in any way limit its obligation assumed under this chapter to
retain the significant risk of the cost of services rendered under
this chapter to any Medi-Cal beneficiary enrolled in the plan.
(d) As a condition of the department's approval of any subcontract
entered into by a prepaid health plan under this chapter, the plan
shall specify its retention of significant risk by designating one of
the options under subdivision (e) as its operating definition of
significant risk, or by any other method approved by the department
that would meet the requirement set forth in subdivision (c).
(e) "Significant risk" means financial responsibility for either
of the following:
(1) All expenditures in excess of 115 percent of the specified
total expenditures estimated under each subcontract.
(2) All inpatient hospitalization expenditures as determined by
the department, including expenditures for services connected with
hospitalization.

14464. (a) The department may negotiate and establish an individual
administrative cost limit in its contracts with each prepaid health
plan or Medi-Cal managed care plan contracting under Chapter 7
(commencing with Section 14000) or Chapter 8 (commencing with Section
14200) providing services to Medi-Cal beneficiary enrollees.
(b) As used in this section, prepaid health plan or Medi-Cal
managed care plan "administrative costs" includes net profit or
revenue in excess of expenditures, in addition to those items set
forth in Section 1300.78 of Title 10 of the California Code of
Regulations and those items set forth by the director.