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New Laws Impacting California Behavioral Health Care Providers and Labs

As part of an increasing trend towards regulation of behavioral health, a pair of new laws have been adopted that will impact certain California behavioral health providers and laboratories, with two proposed companion laws vetoed by Governor Newsom but expected to return.

AB 919, which is effective January 1, 2020, restricts the extent to which behavioral health providers can offer housing and transportation as a component of their services. California Department of Health Care Services (DHCS)-certified outpatient treatment providers and laboratories that lease, manage or own housing must maintain separate housing contracts providing that clients are responsible for housing costs, independent of any insurance benefits.

AB 919 also (1) limits the ability of outpatient treatment programs to provide discounted housing and transportation services, including requiring clients to enter into a repayment plan for any subsidized services and (2) limits transportation services to less than 125 miles for ground transportation, with air transportation required to include a return ticket for one year following discharge. We note that AB 919 diverges from similar, but stricter, provisions of the Federal Anti-Kickback Statute, highlighting the need for impacted providers and labs to be mindful of both federal and state requirements in their business practices.

AB 919 requires DHCS to establish an enforcement program and allocate staffing resources for oversight and guidance, and provides that violations may result in license suspension or revocation.

Further, AB 290 limits the ability of California health care providers to pay the cost of health insurance premiums, whether directly or via associated nonprofit entities. Payment of patient health insurance premiums has been a common practice among dialysis treatment providers, but this law will also be impactful to behavioral health providers who engage in this practice. 

In addition to AB 919 and AB 290, the California Legislature passed AB 920 and SB 589; both of which were subsequently vetoed by Governor Newsom. AB 920 would have required outpatient alcoholism or drug abuse recovery or treatment programs to become licensed by DHCS, as opposed to the current voluntary certification status of these programs. We believe this bill will be re-introduced in the 2020 Legislative Session in a revised form.

Also passed by the Legislature, but vetoed, Senate Bill 589 would have prohibited licensed and unlicensed substance abuse treatment facilities, sober living residences and marketers from making false or misleading statements about a provider’s services or geographical locations.  Similar to AB 920, we believe this bill will be re-introduced in a revised form in 2020.

What Should California Substance Use Disorder Providers and Labs Do Next?

  • Become familiar with the requirements of AB 919 and AB 290, along with forthcoming DHCS guidance on these new laws.

  • Review policies and procedures relating to offering housing and transportation, or funding of health insurance premiums, to existing and potential clients to ensure compliance with California laws.  

  • Review arrangements with third parties that provide transportation or housing on behalf of a treatment center or to treatment center clients.

  • Consider training for appropriate personnel, management and ownership to ensure compliance with new laws.  

  • Remain alert for further regulatory and legislative developments that may impact business practices.

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© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume IX, Number 297
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Paul Gomez, Polsinelli Law Firm, Los Angeles, Healthcare Law Attorney
Principal

Paul Gomez brings a deep understanding of the major forces driving many healthcare transactions, including shifting payment models, advances in healthcare technology, and the need to achieve greater economies of scale. He combines that understanding with his knowledge of key health care legal requirements that impact the structure of healthcare deals and contracts to help clients attain their goals in a practical and efficient manner.

Paul's health care transactional and regulatory practice is centered around: 

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Richard Rifenbark, Polsinelli Law Firm, Los Angeles, Healthcare Law Attorney
Principal

Richard Rifenbark relies on his knowledge and experience to help clients identify, avoid, and (when necessary) resolve difficult regulatory compliance issues. He regularly advises clients on health care fraud and abuse laws and other regulatory issues, including the federal anti-kickback statute, stark physician self-referral law, false claims act, state licensing issues, corporate practice of medicine doctrines, and state fraud and abuse laws. Richard also negotiates and drafts transactional document agreements, including, merger and acquisition, affiliation,...

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Nathaniel 'Tani' Weiner Principal Behavioral Health Corporate and Transactional Commercial Contracts and Transactions Joint Ventures and Strategic Alliances Mergers, Acquisitions and Divestitures Outside General Counsel Health Care Services Health Care Industry
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Nathaniel ‘Tani’ Weiner is a seasoned corporate lawyer with a special focus in the behavioral health field. He designs, implements and closes deals by taking into account not only traditional corporate structure considerations but also the additional layers of licensure, regulatory and reimbursement considerations that are part of executing transactions in the highly regulated health care industry. Tani regularly partners with management teams and equity sponsors to successfully execute growth strategies through M&A, financing, joint venture, and real estate transactions. 

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Ryan McAteer provides around-the-clock expertise and availability to clients. Ryan’s interest in health care stems from the 2010 Patient Protection and Affordable Care Act and his prior experience working for a global medical device and equipment manufacturer. Ryan is committed to achieving positive outcomes for health care clients, including corporate and regulatory counsel, hospital and health facility merger and acquisition support, and related research and legal guidance. He has been involved in several complex hospital, health system, and pharmacy transactions and...

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