AB 749

This bill makes certain changes with respect to the retention and disposition

of surpluses generated by a provider of rate-based client services purchased by the

Department of Children and Families, the Department of Corrections, the

Department of Health Services, or a county department of human services, social

services, community programs, or developmental disabilities services (county

department).

Current law permits a nonprofit, nonstock corporation (provider) that contracts

with DCF, DOC, DHS, or a county department to provide client services on the basis

of a unit rate per client service to retain up to 5 percent of the contract amount if

revenues under the contract for the provision of a rate-based service, which is

defined under current law as a service that is reimbursed through a prospectively set

rate, exceed the allowable costs incurred in the contract period. Current law permits

a provider to use those retained funds to cover a deficit between revenue and

allowable costs incurred in any preceding or future contract period for the same

rate-based service that generated the surplus or to address the programmatic needs

of clients served by that service.

This bill provides that a provider of a rate-based service is permitted to retain

not less than

5 percent

of the revenue received

under the contract

or

a lesser amount

determined in the sole discretion of the provider. The bill also eliminates the

authority of a provider of a rate-based service to use those retained funds to cover

deficits incurred in preceding or future contract periods and instead permits a

provider of that service to use those retained funds to address the programmatic

needs of any client of the provider, not just the clients served by that service. In

addition, the bill provides that if on December 31 of any year the amount

accumulated by the provider of a rate-based service from all contract periods ending

during that year for the rate-based service exceeds the amount retained by the

provider for that rate-based service, the provider must provide written notice of that

excess to all purchasers of that rate-based service and, upon the written request of

such a purchaser received no later than six months after the date of the notice, must

return to the purchaser the purchaser's proportional share of that excess. The bill,

however, does not guarantee the generation of a surplus by a provider of a rate-based

service.

Current law also permits a provider of a rate-based service to accumulate funds

from more than one contract period, except that if the amount accumulated by a

provider for all contract periods for a rate-based service exceeds 10 percent of the