PACS Enforcement Actions & Penalties 3 — Questions and Answers
Question 1: Under California's Knox-Keene Act, health plans that fail to comply with prior authorization timelines may face fines of how much per violation?
- Up to $500 per day
- Up to $2,500 per violation
- Up to $10,000 per day per violation (Correct answer)
- Up to $1 million per incident
Correct answer: Up to $10,000 per day per violation
California's Department of Managed Health Care can impose fines up to $10,000 per day per violation for health plan failures, including PA timeline non-compliance.
Question 2: A utilization management company is found to have financial incentives that reward reviewers for denying prior authorization requests. This practice most directly violates which principle?
- Network adequacy
- Independence of utilization review (Correct answer)
- COBRA continuation requirements
- Open enrollment provisions
Correct answer: Independence of utilization review
UM regulations require that reviewer decisions be based solely on clinical criteria and prohibit compensation structures that create incentives to deny coverage.
Question 3: Which of the following best describes a 'pattern of practice' violation in the context of prior authorization enforcement?
- A single erroneous denial that caused patient harm
- Repeated systematic failures that demonstrate a course of conduct rather than isolated errors (Correct answer)
- A plan's written policy that differs from its actual practice
- A provider's failure to submit required documentation
Correct answer: Repeated systematic failures that demonstrate a course of conduct rather than isolated errors
Pattern of practice violations involve repeated, systematic failures rather than isolated incidents and typically attract more severe regulatory scrutiny and penalties.
Question 4: Under URAC accreditation standards, a health plan that loses its accreditation due to PA process failures faces which immediate consequence?
- Criminal prosecution of executives
- Loss of ability to market compliance with URAC standards to employers and payers (Correct answer)
- Automatic loss of state licensure
- Federal tax penalties
Correct answer: Loss of ability to market compliance with URAC standards to employers and payers
URAC accreditation is voluntary, but losing it means the organization can no longer represent itself as URAC-accredited, which can affect contract opportunities and credibility.
Question 5: A patient is harmed after a health plan wrongfully denies PA for emergency surgery. Under state tort law, which theory of liability is most likely to apply to the plan?
- Negligent entrustment
- Bad faith denial of benefits (Correct answer)
- Strict product liability
- Intentional infliction of emotional distress only
Correct answer: Bad faith denial of benefits
Bad faith denial of benefits is a recognized tort in many states where a plan unreasonably denies or delays authorization, especially when harm results.
Question 6: The OIG's exclusion list primarily affects prior authorization because excluded entities:
- Cannot submit PA requests on behalf of patients
- Cannot receive payment from federal healthcare programs for services rendered (Correct answer)
- Are prohibited from performing utilization review
- Must obtain double approval for all PA submissions
Correct answer: Cannot receive payment from federal healthcare programs for services rendered
OIG exclusion bars entities from receiving payment from Medicare, Medicaid, and other federal programs, making any PA approval for excluded providers effectively uncollectable.
Question 7: When a state external review organization overturns a health plan's PA denial, the health plan is legally required to:
- Conduct an internal review of the external reviewer's credentials
- Immediately implement the external review decision and provide coverage (Correct answer)
- Appeal the decision to the state insurance commissioner
- Negotiate a settlement with the member
Correct answer: Immediately implement the external review decision and provide coverage
State and federal law requires health plans to immediately comply with external review decisions, which are binding on the plan.
PACS Enforcement Actions & Penalties 3
Under California's Knox-Keene Act, health plans that fail to comply with prior authorization timelines may face fines of how much per violation?