97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB2017

 

Introduced , by Rep. Franco Coladipietro

 

SYNOPSIS AS INTRODUCED:
 
215 ILCS 5/512-3  from Ch. 73, par. 1065.59-3
215 ILCS 5/512-7  from Ch. 73, par. 1065.59-7

    Amends the Illinois Insurance Code. Makes changes in the provision concerning definitions. Provides that when an on-site audit or a desk audit of the records of a pharmacy is conducted by any entity, the audit shall be conducted in accordance with certain criteria. Provides that the auditing entity, administrator, or its representative must provide the pharmacy with a written report of the audit and comply with certain requirements. Sets forth provisions concerning appeals processes, accounting practices, and applicability.


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A BILL FOR

 

HB2017LRB097 10463 RPM 50700 b

1    AN ACT concerning insurance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Insurance Code is amended by
5changing Sections 512-3 and 512-7 as follows:
 
6    (215 ILCS 5/512-3)  (from Ch. 73, par. 1065.59-3)
7    Sec. 512-3. Definitions. For the purposes of this Article,
8unless the context otherwise requires, the terms defined in
9this Article have the meanings ascribed to them herein:
10    (a) "Third party prescription program" or "program" means
11any system of providing for the reimbursement of pharmaceutical
12services and prescription drug products offered or operated in
13this State under a contractual arrangement or agreement between
14a provider of such services and another party who is not the
15consumer of those services and products. Such programs may
16include, but need not be limited to, employee benefit plans
17whereby a consumer receives prescription drugs or other
18pharmaceutical services and those services are paid for by an
19agent of the employer or others.
20    (b) "Third party program administrator" or "administrator"
21or "entity" means any pharmacy benefits manager or person,
22business, or other entity that performs pharmacy benefits
23management. The terms include a person or auditing entity

 

 

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1acting for a pharmacy benefits manager in a contractual or
2employment relationship in the performance of pharmacy
3benefits management for a managed care company or nonprofit
4hospital or the services of a pharmacy benefits administrator,
5medical service organization, insurance company, third-party
6payor, person, partnership or corporation who issues or causes
7to be issued any payment or reimbursement to a provider for
8services rendered pursuant to a third party prescription
9program, but does not include the Director of Healthcare and
10Family Services or any agent authorized by the Director to
11reimburse a provider of services rendered pursuant to a program
12of which the Department of Healthcare and Family Services is
13the third party.
14(Source: P.A. 95-331, eff. 8-21-07.)
 
15    (215 ILCS 5/512-7)  (from Ch. 73, par. 1065.59-7)
16    Sec. 512-7. Contractual provisions.
17    (a) Any agreement or contract entered into in this State
18between the administrator of a program and a pharmacy shall
19include a statement of the method and amount of reimbursement
20to the pharmacy for services rendered to persons enrolled in
21the program, the frequency of payment by the program
22administrator to the pharmacy for those services, and a method
23for the adjudication of complaints and the settlement of
24disputes between the contracting parties.
25    (b)(1) A program shall provide an annual period of at least

 

 

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1    30 days during which any pharmacy licensed under the
2    Pharmacy Practice Act may elect to participate in the
3    program under the program terms for at least one year.
4        (2) If compliance with the requirements of this
5    subsection (b) would impair any provision of a contract
6    between a program and any other person, and if the contract
7    provision was in existence before January 1, 1990, then
8    immediately after the expiration of those contract
9    provisions the program shall comply with the requirements
10    of this subsection (b).
11        (3) This subsection (b) does not apply if:
12            (A) the program administrator is a licensed health
13        maintenance organization that owns or controls a
14        pharmacy and that enters into an agreement or contract
15        with that pharmacy in accordance with subsection (a);
16        or
17            (B) the program administrator is a licensed health
18        maintenance organization that is owned or controlled
19        by another entity that also owns or controls a
20        pharmacy, and the administrator enters into an
21        agreement or contract with that pharmacy in accordance
22        with subsection (a).
23            (4) This subsection (b) shall be inoperative after
24        October 31, 1992.
25    (c) The program administrator shall cause to be issued an
26identification card to each person enrolled in the program. The

 

 

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1identification card shall include:
2        (1) the name of the individual enrolled in the program;
3    and
4        (2) an expiration date if required under the
5    contractual arrangement or agreement between a provider of
6    pharmaceutical services and prescription drug products and
7    the third party prescription program administrator.
8    (d) Notwithstanding any other law, when an on-site audit or
9a desk audit of the records of a pharmacy is conducted by any
10entity, the audit shall be conducted in accordance with the
11following criteria:
12        (1) no entity shall conduct an on-site audit or a desk
13    audit at a particular pharmacy more than once annually;
14    however, this paragraph (1) shall not apply when an entity
15    must return to a pharmacy to complete an audit already in
16    progress, there is suspected or previously identified
17    history of errors, or inappropriate or illegal activity
18    that the entity has brought to the attention of the
19    pharmacy owner or corporate headquarters of the pharmacy;
20        (2) the entity conducting the on-site audit or desk
21    audit must give the pharmacy written notice, delivered by
22    certified mail to the owner of the pharmacy, at least 2
23    weeks prior to conducting the initial on-site audit for
24    each audit cycle and must describe in exact detail the
25    records to be examined;
26        (3) the entity conducting the on-site audit or desk

 

 

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1    audit shall not exceed 4 hours in duration and shall not
2    interfere with the delivery of pharmacist services to any
3    patient, and shall utilize every effort to minimize
4    inconvenience and disruption to pharmacy operations during
5    the audit process; on-site audits shall review no more than
6    100 unique prescription numbers during an initial audit;
7        (4) any audit that involves clinical or professional
8    judgment must be conducted by or in consultation with a
9    pharmacist licensed in this State;
10        (5) any clerical or record-keeping error, such as a
11    typographical error, scrivener's error, or computer error,
12    regarding a required document or record does not constitute
13    fraud; however, such claims may be subject to recoupment;
14        (6) a pharmacy may use the records of a hospital,
15    physician, or other authorized practitioner of the healing
16    arts for drugs or medicinal supplies written or transmitted
17    by any means of communication for purposes of validating
18    the pharmacy record with respect to orders or refills of a
19    legend or narcotic drug;
20        (7) a finding of an overpayment or underpayment must be
21    based on the actual overpayment or underpayment and may not
22    be a projection based on the number of patients served
23    having a similar diagnosis or on the number of similar
24    orders or refills for similar drugs;
25        (8) a finding of overpayment to the pharmacy shall
26    invoke a recoupment of dispensing fees only, such as the

 

 

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1    medications were legally dispensed and received by a valid
2    patient under order of a valid prescription and previously
3    authorized for payment by the entity;
4        (9) each pharmacy shall be audited under the same
5    standards, parameters, and frequency as other similarly
6    situated pharmacies audited by the entity;
7        (10) the period covered by an audit may not exceed one
8    year from the date the claim was submitted to or
9    adjudicated by a managed care company, nonprofit hospital
10    or medical service organization, insurance company,
11    third-party payor, pharmacy benefit manager, health
12    program administered by a department of the State, or any
13    entity that represents such companies, groups, or
14    departments;
15        (11) no audit may be initiated or scheduled during the
16    first 7 calendar days of any month, or during peak holiday
17    seasons, due to the high volume of prescriptions filled in
18    the pharmacy during that time unless otherwise consented to
19    by the pharmacy;
20        (12) the firm or entity conducting the on-site audit or
21    desk audit on behalf of the plan provider or pharmacy
22    benefits manager may not receive compensation payments
23    based on a formula calculated on the amount recovered;
24        (13) any necessary or legally required information may
25    appear on the front or back or affixed to the prescription
26    to be deemed legally valid, along with any accepted

 

 

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1    electronic records to the extent permitted by law; and
2        (14) when a valid prescription is in force, auditors
3    may not seek recoupment for claims that exceeded face value
4    of prescription or similar claims when a duly authorized
5    prescription is in force and permitted under law.
6    (e) The auditing entity, administrator, or its
7representative described in subsection (d) of this Section must
8provide the pharmacy with a written report of the audit and
9comply with the following requirements:
10        (1) the preliminary audit report must be delivered to
11    the pharmacy within 90 days after conclusion of the audit
12    along with a written copy of the formal appeals process to
13    each pharmacy that is being audited;
14        (2) a pharmacy shall be allowed at least 60 days
15    following receipt of the preliminary audit report in which
16    to produce documentation to address any discrepancy found
17    during the audit;
18        (3) a final audit report shall be delivered to the
19    pharmacy within 120 days after receipt of the preliminary
20    audit report or final appeal, as provided for in Section 6
21    of this Code, whichever is later;
22        (4) the audit report must be signed and shall include
23    the signature of any pharmacist participating in the audit;
24        (5) any recoupments of disputed funds shall only occur
25    after final internal disposition of the audit, including
26    the appeals process as set forth in Section 6 of this Code;

 

 

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1        (6) interest shall not accrue during the audit period;
2        (7) each administrator or its representative
3    conducting an audit shall provide a copy of the final audit
4    report, after completion of any review process, to the both
5    the pharmacy and the plan sponsor; and
6        (8) the auditing entity shall conduct an exit interview
7    at the close of the audit, at a time agreed to by the
8    pharmacy, which shall provide the following: (i) response
9    to questions from the auditing entity; (ii) review and
10    comment on the initial finding of the auditing entity; and
11    (iii) additional documentation to clarify the initial
12    findings of the auditing entity.
13    (f) Appeal processes pursuant to this Section shall comport
14with the following provisions:
15        (1) The National Council for Prescription Drug
16    Programs or any other recognized national industry
17    standard shall be used to evaluate claims submission or
18    product size disputes.
19        (2) Each administrator or its representative
20    conducting an audit shall establish a written appeals
21    process under which a pharmacy may appeal an unfavorable
22    preliminary audit report to the administrator.
23        (3) If, following the appeal, the administrator finds
24    that an unfavorable audit report or any portion thereof is
25    unsubstantiated, then the administrator shall dismiss the
26    audit report or said portion without the necessity of any

 

 

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1    further action.
2    (g) Notwithstanding any other provision in this Code, the
3administrator conducting the audit pursuant to subsections (d)
4and (e) of this Section shall not use the accounting practice
5of extrapolation in calculating recoupments or penalties for
6audits.
7    As used in this Section, "accounting practice of
8extrapolation" means an audit of a sample of prescription drug
9benefit claims submitted by a pharmacy to the administrator
10conducting the audit that is then used to estimate audit
11results for a larger batch or group of claims not reviewed by
12the auditor.
13    (h) The audit criteria set forth in this Section shall
14apply only to audits of claims for services provided and claims
15submitted for payment after the effective date of this
16amendatory Act of the 97th General Assembly and all criteria of
17the audit standards must be set forth in law and criteria more
18restrictive than Illinois law shall not be permitted nor used
19as principles of audit.
20    (i) This Section shall not apply to any investigative audit
21conducted by or on behalf of a State agency that involves
22fraud, willful misrepresentation, or abuse, including, without
23limitation, investigative audits or any other statutory
24provision that authorizes investigations relating to insurance
25fraud.
26(Source: P.A. 95-689, eff. 10-29-07.)