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What’s a Medi-Cal Network Provider and Why Does it Matter?

Updated: Sep 6, 2019

Look out for substantial amendments to your Medi-Cal managed care contract, coming soon.


In the past three years, the Medi-Cal managed care system has struggled to keep up with quick-changing regulations enacted by the federal government, while providing or arranging the health care for more Californians than ever before. In response to the incredible growth in Medicaid managed care around the country, in 2016, the Centers for Medicare and Medicaid Services adopted a regulation (commonly referred to as the “Megareg”) completely overhauling 42 CFR part 438, which governs Medicaid managed care plans. Many have heard me speak on this topic over the last three years.


The Megareg formalized numerous distinctions between non-contract providers and “network providers.” Most importantly for California hospitals, the Megareg restricted the ability of states to direct payments from Medi-Cal managed care plans to network providers. The Megareg also required states to develop and impose network adequacy and access standards on Medicaid managed care plans, which would require those plans to report to the respective states a roster of network providers. In addition, the Megareg required Medicaid managed care plans to impose certain requirements on network providers through the contracting process.


For this post, we focus on the definition of a “network provider” as many Medi-Cal managed care plans are in the process of updating their contracts and provider manuals particularly with respect to hospitals presumably so that those hospitals are able to access directed payments funded by the quality assurance fee program from Medi-Cal managed care plans. The California Department of Health Care Services (“DHCS”) has attempted to define what a “network provider” is.

For dates of services prior to June 30, 2019, the DHCS has defined a “network provider” is a provider having an agreement that: (1) covers one or more defined non-excluded populations of Medi-Cal beneficiaries; (2) covers a defined set of one or more non--excluded hospital services; (3) specifies rates of payment or includes a defined methodology for calculating specific rates of payment; and (4) is for a term of at least 120 days, be signed and dated, and be effective for the dates of service. The DHCS has opined that it will not consider agreements limited to a single patient, limited to a few locator infants only, that permit payment to be negotiated on a per-patient or single instance of service basis, or expressly permit the provider to select case-by-case whether to provide covered services to a covered patient as network provider agreements.


To address the multitude of sub-delegated arrangements prevalent in Medi-Cal managed care, the DHCS has stated that it would require a “demonstrable unbroken contracting path” that covers the service, the member, and the applicable date of service. We understand that given the complexity of the Medi-Cal managed care program and the variety of sub- delegated arrangements, many arrangements do not clearly fit within or outside of the concept of a “demonstrable unbroken contracting path.”


On January 17, 2019, the DHCS issued All Plan Letter 19-001, which provides additional guidance on network provider status. The DHCS has announced that effective July 1, 2019, only services provided under an agreement that meets the criteria in All Plan Letter 19-001 will be eligible for directed payments. Despite industry input that some of the proposed criteria went beyond existing legal and regulatory requirements, the DHCS finalized the criteria in the form of an Attachment to the All Plan Letter.


Medi-Cal managed care plans appear to be implementing this requirement in different ways. Some plans have proposed amended regulatory addenda to provider contracts that mostly align with All Plan Letter 19-001 and other regulatory requirements. Others have communicated that they are amending to include new regulatory requirements, but have proposed amendments that seem to exceed the scope of All Plan Letter 19-001. Yet others apparently are implementing All Plan Letter 19-001 by amendments to their provider manuals, which are often referenced or incorporated into their provider contracts.


Providers receiving “regulatory amendments” to their Medi-Cal managed care agreements should review them closely to confirm that they are sufficient to confer “network provider” status and to review the additional legal obligations imposed by the amendments.

For further information, please contact Felicia Sze at felicia@athenelaw.com.