Program Review and Investigations Committee




<MeetMDY1> December 8, 2011


Call to Order and Roll Call

The<MeetNo2> Program Review and Investigations Committee met on<Day> Thursday,<MeetMDY2> December 8, 2011, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Jimmy Higdon, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Jimmy Higdon, Co-Chair; Representative Fitz Steele, Co-Chair; Senators Vernie McGaha, John Schickel, Dan "Malano" Seum, Brandon Smith, and Katie Kratz Stine; Representatives Dwight D. Butler, Leslie Combs, Terry Mills, David Osborne, Ruth Ann Palumbo, Rick Rand, and Arnold Simpson.


Legislative Guests: Representative King.


Guests: Preston P. Nunnelley, M.D., President; C. William Schmidt, Executive Director; Michael S. Rodman, Assistant Executive Director; Kentucky Board of Medical Licensure. Joe Barrows, Executive Director; Dale Edmonson, Chairman; Commercial Mobile Radio Service Emergency Telecommunications Board. Major Keith A. Peercy, Chief Information Officer, Kentucky State Police. Stephen R. Hall, Commissioner; Betsy Dunnigan, Deputy Commissioner; Natalie Kelly, Manager, Division of Behavioral Health, Program Development Branch; Department for Behavioral Health, Developmental, and Intellectual Disabilities, Cabinet for Health and Family Services.


LRC Staff: Greg Hager, Committee Staff Administrator; Christopher Hall; Sarah Harp; Colleen Kennedy; Van Knowles; Lora Littleton; Jean Ann Myatt; Cindy Upton; Stella Mountain, Committee Assistant.


Approve Minutes for November 10, 2011

Upon motion by Senator Schickel and second by Representative Mills, the minutes of the November 10, 2011 meeting were approved by voice vote, without objection.


Consideration of report Kentucky’s Community Mental Health System Is Expanding and Would Benefit From Better Planning and Reporting: An Update (presented at October 13 meeting)

            Senator Higdon announced that there would be no vote today on the report on the Kentucky’s Community Mental Health System report.


Consideration of report The Kentucky Thoroughbred Breeding Industry and State Programs That Assist the Equine Industry (presented at Nov. 10 meeting). Upon motion by Representative Palumbo and second by Representative Osborne, the report was adopted by roll call vote.


Selection of Study Topics for 2012

Senator Higdon announced that the committee would not vote on study topics today. A meeting will be scheduled for January for consideration of study topics.


Kentucky Board of Medical Licensure’s Use of KASPER Data

Dr. Nunnelley provided background information on the Kentucky Board of Medical Licensure (KBML). The board has requested 1,100 KASPER reports since 2005, including more than 250 in 2011. KASPER reports are used in investigating complaints and in monitoring compliance. After the August 2011 testimony before Program Review and Investigations, board officials met with officials with the Cabinet for Health and Family Services (CHFS). The board now looks at quarterly trend reports. If there is a bump in an area, the top 10 prescribers are analyzed. The board has opened five investigations based on trend reports. The board has modified the application for physicians to include questions on whether the physician participates in a pain clinic and whether the physician prescribes chronic pain medications. Over time, 14 percent of complaints have been for inappropriate prescribing. For these complaints, 132 actions were taken. Since September 1, the board has opened 28 new prescribing cases. There were three referrals from law enforcement in the past week. Since 2008, the board has participated in 18 training sessions with CHFS. There is a need to work on making KASPER real time. Physicians should be able to delegate authority within the office to use KASPER. The existing criminal penalties for releasing KASPER reports should be reconsidered. The board will be reviewing the recommendations of the governor’s task force on KASPER.


Senator Higdon asked what percentage of doctors use KASPER. Mr. Rodman said that CHFS would have that information. Dr. Nunnelley said that usage is low.


In response to a question from Senator Higdon, Dr. Nunnelley said that he did not know why CHFS postponed the KASPER alert program mentioned in the documents submitted by KBML.


Senator Stine asked whether the top 10 prescribers list is based only on the number of prescriptions or whether it takes into account the number of patients of a practice. Dr. Nunnelley said that it is based on the number of prescriptions. As part of the investigation, the board will look at volume and the specialty of the physician.


Senator Stine asked what kind of drugs nurses are prescribing. Dr. Nunnelley said that nurses must have collaborative agreements with physicians to prescribe and are excluded from writing prescriptions for the most addictive drugs.


Senator Stine asked about coordination between KBML and the Board of Nursing. Dr. Nunnelley said collaborative agreements go the Board of Nursing. KBML gets a list of physicians with collaborative agreements, not the agreements themselves.

            Senator Stine expressed her concern that the physicians are being closely monitored while nurses may not be. A physician could be using an agent for activities for which the physician would be monitored. Dr. Nunnelley said that someone from the Board of Nursing testified at the previous KASPER task force meeting. He thinks the board is doing a good job of policing.


Senator Stine commented that there appears to be a lack of coordination. Dr. Nunnelley said that KBML has no supervision of advanced nurse practitioners. Advanced nurse practitioners can practice in Kentucky without supervision. The only requirement is for them to have a collaborative agreement for prescribing medications.


Representative Palumbo asked if there is a recommendation related to criminal penalties. Dr. Nunnelley said that the KASPER report should be part of the patient’s file, which is governed by HIPAA [Health Insurance Portability and Accountability Act]. Physicians should not be subject to criminal penalty for releasing a KASPER report.


Senator McGaha asked for clarification of whether the top 10 prescribers list is based on data from physicians using KASPER. Dr. Nunnelley said that the top 10 prescribers list is based on data from pharmacists and is not limited to physicians using KASPER.


In response to a question from Senator McGaha, Dr. Nunnelley said that approximately 40 percent of physicians are registered with KASPER, of which half are using KASPER but that CHFS would have the specific numbers. Not all physicians need to be using KASPER. Senator McGaha said that low usage of KASPER is a concern.


Representative Combs asked when the board began asking the two new questions on applications. Dr. Nunnelley replied that the application has just been changed.


In response to a question from Representative Combs, Dr. Nunnelley said that the prescribing nurse would be considered the responsible party in prescriptions under collaborate agreements.


Representative Combs commented that another reason for KASPER reports is for physicians to see what other drugs are prescribed for the patient by another physician and that there is no conflict in taking the newly prescribed drugs. This is an issue particularly with seniors.


Representative Steele asked what the procedures are for investigating a physician and whether any physician could be investigated, not just those using KASPER. Dr. Nunnelley said that any physician may be investigated. The board does not stop a physician’s practice immediately. KASPER is used to get information on patients who may be abusing drugs. Patients’ charts are reviewed. A license may be revoked or prescribing authority may be restricted. The board has closed practices when the allegations were serious enough.


In response to a question from Representative Steele, Dr. Nunnelley said the time frame for making a decision ranges from immediate to 6 months.


In response to a question from Senator Stine, Mr. Rodman said that the geographic connection is to the prescriber, not the pharmacy. Dr. Nunnelley said that the board has access to reports based on the location of the prescriber and the pharmacy.


In response to a question from Senator Stine, Dr. Nunnelley said that there are physicians who dispense drugs. There are not many but the number is increasing. A physician cannot delegate the authority to dispense to another person in the office.


Senator Smith said that methadone clinics dispense in house and do not report, so someone could go from a methadone clinic to a pain clinic. Dr. Nunnelley said that the board did not have data on the volume but realizes this is a problem. It is also an issue that the Veterans Administration does not use KASPER.


Senator Smith said that deaths are occurring because prescribing physicians do not know about the methadone use. The state has tried to address this but methadone clinics are federally recognized. Dr. Nunnelley said he was at a recent meeting in which federal officials said that they were working on a solution.


Senator Higdon asked if there has been any success in recent months in closing pill mills. Mr. Rodman said that the board is close to bringing some cases.


Staff Report: 911 Services and Funding: Accountability and Financial Information Should Be Improved

Van Knowles presented the report 911 Services and Funding: Accountability and Financial Information Should Be Improved. In January 2011, the Program Review and Investigations Committee authorized a study of 911 services and funding. During the 2011 Regular Session, the General Assembly enacted Senate Bill 119, which required the CMRS Board to collect information and evaluate 911 funding and expenditures. The bill also required legislative staff to assess funding options. This draft report describes Program Review staff findings and serves as the LRC staff response to Senate Bill 119.


Public safety answering points (PSAPs) receive 911 calls. Kentucky has 93 locally operated PSAPs that are certified to handle enhanced wireless 911 calls. Most serve one or more counties including their cities. Some serve only one or more cities, and some serve only county areas outside cities. Six counties have only basic landline 911 service. All Kentucky counties have enhanced wireless 911 service.


In order to provide complete enhanced wireless coverage, the Kentucky State Police answers calls for 30 counties. For some of those counties, KSP answers both landline and wireless calls. The Kentucky State Police serves counties that have no PSAP or are not able to handle enhanced wireless 911 calls. Each of the 16 posts has a PSAP.


Responsibility for 911 is split between state and local governments. Local governments, which have primary responsibility, operate PSAPs or arrange for 911 coverage and generally raise the bulk of funds for 911 service. State government, through the CMRS Board, ensures that wireless calls are handled properly and distributes wireless 911 funds.


In many places, local governments work together on 911 services. A common arrangement is a city that operates a PSAP for an entire county. Some local governments formed interlocal boards that receive revenues and make budget decisions. Local control may be limited in city-county arrangements and with interlocal boards and other arrangements.


Recommendation 2.1

All arrangements for 911 services that involve more than one local government should be made by written interlocal agreement. An interlocal agreement for 911 services should be among the local governments only and should empower one local government, or create a 911 board, with the authority to control funds and provide or contract for 911 services. If there is a 911 board, it should designate or contract with a fiscal agent. A 911 board should issue an annual audited financial statement. Local 911 fees should be remitted directly to the empowered local government or 911 board. The General Assembly may wish to consider codifying some or all of these terms.


Recommendation 2.2

All arrangements for 911 services that involve more than one local government should be made by written interlocal agreement. An interlocal agreement for 911 services should be among the local governments only and should empower one local government, or create a 911 board, with the authority to control funds and provide or contract for 911 services. If there is a 911 board, it should designate or contract with a fiscal agent. A 911 board should issue an annual audited financial statement. Local 911 fees should be remitted directly to the empowered local government or 911 board. The General Assembly may wish to consider codifying some or all of these terms.


The CMRS Board is the state agency that is responsible for overseeing wireless 911 service. It ensures that PSAPs can handle enhanced wireless 911 calls correctly. PSAPs that are certified receive CMRS funds. The board requires certified PSAPs to pass a geospatial audit to verify that a PSAP can locate wireless 911 callers.


Recommendation 2.3

As it has proposed, the CMRS Board should make passage of a geospatial audit a prerequisite for certification of a public safety answering point and should specify an ongoing program of geospatial audits. The board should also ask its auditors to include sufficient testing to assess the location service accuracy of wireless providers in each jurisdiction and to record that information in their geospatial audit reports.


Funding for 911 includes local 911 fees, local general funds, and the state 911 wireless fee. The Kentucky State Police also uses some state general funds to operate its PSAPs. Permitted uses of local 911 fees are unclear and differ from the permitted uses of the state 911 fee. Controls on 911 funds are inconsistent. Local 911 funds are only occasionally subject to audit. Local accounting procedures can make it difficult to perform audits of local and wireless 911 funds. The wireless fund audits might not reach all the entities that handle wireless funds because the CMRS Board’s authority is limited to auditing PSAPs, and the board has audited only a selection of PSAPs during each 2-year audit cycle. The board also audits wireless providers to verify fee collection, selecting some providers for each 2-year cycle.


Recommendation 2.4

The General Assembly may wish to clarify the CMRS Board’s audit cycles for providers and authorities that operate PSAPs. Regarding providers, the General Assembly may wish to consider whether the board should audit all providers, all major providers with a sample of minor providers, or a sample of providers every 24 months. Regarding PSAP authorities, the General Assembly may wish to clarify whether all should be audited every 24 months or whether a rotating cycle of audits should be permitted. In the absence of such clarification, the board should audit all providers and all PSAP authorities every 24 months.


Recommendation 2.5

The General Assembly may wish to consider requiring that

●   local and wireless 911 revenues be maintained in separate restricted funds to ensure expenditures from these funds are easily auditable and distinct from other local funds;

●   each entity operating a PSAP create a 911 cost center or have some other means to identify 911 expenses; and

●   all entities that collect, receive, transfer, or expend dedicated 911 funds, whether local or wireless or both, be subject to audit by the CMRS Board or another auditing authority.


The CMRS Board is responsible for reviewing the rate of the wireless 911 fee every 24 months. There appear to have been no reports on such reviews since 2005. The 2005 report did not clearly explain how it reached its conclusions. However, the statute is unclear whether reports are required.


Recommendation 3.1

The General Assembly may wish to consider modifying KRS 65.7629(4) to clarify whether the CMRS Board should report on the sufficiency of the rate of the CMRS service charge at least once every 24 months using its audits and the information gathered under KRS 65.7630 and should report the methodology and findings of each review to the governor, LRC, and other officials.


The wireless statute does not refer to local governments but rather names “PSAPs” to receive funds and be subject to audits. PSAPs have no standing as fiscal agents. A local or state authority operates each PSAP and handles its funds. The wording has limited the CMRS Board’s ability to distribute and audit state 911 funds.


Recommendation 3.2

The General Assembly may wish to consider whether to amend KRS 65.7621 to 65.7643, when referring to distributing and auditing funds, to replace the term “PSAP” with a reference to state or local government authorities responsible for 911 services. The General Assembly may also wish to clarify how wireless funds should be distributed and controlled when local governments obtain 911 services from a state agency, and whether wireless funds distributed on behalf of a certified PSAP may be used to assist a noncertified secondary PSAP to handle wireless enhanced 911 calls.


Local and wireless 911 funds are insufficient to cover the costs of most PSAPs, so they receive supplemental general revenues from local governments. However, some local governments and interlocal boards that contract with the Kentucky State Police have accumulated 911 fund surpluses. The statutes do not provide guidance on surpluses, except to limit them to the original purpose.


Recommendation 3.3

The General Assembly may wish to limit the amount of 911 funds that a local government may hold in reserve for future expenses and to require local governments to reduce 911 levies or return state wireless funds when revenues exceed costs.


Kentucky law permits local governments to levy any 911 fee permissible under the Constitution and statutes. The 911 statute specifically permits local governments to levy a fee on landline phone service. Most local governments have chosen to levy a fee on landline phones. Others levy no 911 fee at all. Landline fees range as high as $4.25 per month. The state wireless fee is 70 cents per month per device. As a result of differing local and state fees, there are disparities among jurisdictions and among types of phone service. In the past, most households paid one landline fee. Now, individuals with multiple devices pay multiple fees.


Regarding choices for 911 funding, the basic choice is whether to pay for 911 services entirely with general revenues at the local or state level. The public safety community has expressed concern that 911 would not receive enough funds using general revenues. The current method uses fees dedicated to 911 purposes, but those fees do not cover all 911 costs, so some general funds are also used. The choices here are what 911 costs should the dedicated fees apply to, and whether the fees should pay for all or just part of 911 costs. Dedicated 911 fees could be charged to individuals, households, businesses, phone service providers, or some combination. There also are choices about the basis of a 911 fee. Options include a property tax surcharge, sales tax surcharge, other tax surcharges, a fee on phone service, or a fee on other utilities. Fees might be levied by local governments only, by the state only, or by a combination. If there are multiple 911 fees, should they be the same statewide or should they vary? Another choice, if 911 fees are levied by the state, is how the fees should be distributed. Choices include uniform distribution to local jurisdictions or continuing the current method that gives more support to smaller communities.


Existing dedicated 911 fees apply to phone lines and devices. The fee for postpaid service—that is, the traditional wireless contract service—is 70 cents per month per phone. The current fee for prepaid wireless service generates significantly less per phone. One of the prepaid fee options probably generates less than 39 cents. Some prepaid providers challenged the existing 911 fee, but so far courts have said Kentucky’s law applies. The decisions are being appealed. Their prepaid business model has led some providers to pay some of the 911 fee themselves rather than collecting it directly from their customers.


In order to accommodate the prepaid business model, the wireless industry proposed, and the National Conference of State Legislatures adopted, a model bill for a point of sale 911 fee on prepaid service. The draft report shows that the model bill would create an uneven fee burden and has opportunities for potentially large losses. If the target is to collect an average of 70 cents per phone, as the postpaid fee does, then the model bill would probably miss the target by around 50 percent. Other losses could occur because of interstate sales over the Internet and other sellers who might not collect the fee. The draft report presents features that probably would reduce the uneven fee burden somewhat and would more likely meet the revenue target.


Regarding funding decisions in general, the draft report makes no recommendations because of limited information. It would be helpful first to have a statewide 911 financial statement showing all costs and all revenues applied to 911 services.


Senate Bill 119 effectively asked for a statewide 911 financial statement showing the costs for delivering 911 services and the revenues used to pay for them. The bill gave the CMRS Board the responsibility to collect the information and report it to the LRC. The board was unable to complete the data collection in time for this draft. Because of the complexities of 911 oversight and funding, the board probably will need to send staff out to the field to collect the information. It is also important to have information about the pricing of landline 911 phone service and the 911 costs of wireless providers.


Recommendation 5.1

The CMRS Board staff should visit all PSAPs and related local governments and boards initially to establish who has the information required by SB 119 and to validate the information. Afterward, CMRS Board staff should visit all PSAPs and related entities periodically to verify SB 119 data or should include data validation in its audit contract. The General Assembly may wish to consider permitting the board to allocate funds to these tasks beyond the current administrative fund limit.


Recommendation 5.2

The CMRS Board should compile a complete statewide 911 financial statement that shows all revenues contributing to and all costs of providing 911 services, covering all primary and secondary, certified and noncertified PSAPs, including

·        all dedicated 911 funds starting at their source and indicating all entities that handle them;

·        all other funds that flow to PSAPs starting at their source and indicating all entities that handle the funds;

·        itemized costs of operating each PSAP;

·        the source and full value of facilities, services, or other items received by PSAPs at discounted or no cost; for which a PSAP otherwise would have to pay;

·        costs of operating any advisory and management boards and any other activities necessary to manage and operate a PSAP, including any costs incurred between a funding source and the PSAP;

·        the value of non-911 tasks performed by PSAP staff; and

·        any cash balances, other assets, and liabilities related to providing 911 services.


Recommendation 5.3

As part of the statewide 911 financial statement, the CMRS Board should

●   examine 911 fee collections on all phone service plans for all telecommunications providers, including the amounts that providers keep to cover 911 fee collection costs;

●   determine the amounts paid to all telecommunications providers for delivering 911 calls to PSAPs, whether they are reasonably caused by 911, and whether they represent the actual cost to deliver the calls; and

●   assess the need for continued wireless provider cost recovery.


Consolidation of PSAPs appears to improve the level of service and flexibility in responding to emergencies, but cost savings are modest and may not appear immediately. Some local governments have developed innovative methods of providing 911 service at significant cost savings. The 911 service provided by the Kentucky State Police appears to have inconsistent quality. Some local authorities were pleased with the service and others reported dissatisfaction.


Recommendation 6.1

The Kentucky State Police should conduct a review of its 911 services to counties, including response time measures, compliance with local protocols, and satisfaction of local responder agencies.


Next generation 911 over the Internet has potential for cost savings and improved service. The CMRS Board is positioning itself to implement the transition as soon as possible.


Representative Palumbo asked for clarification that law enforcement is dissatisfied with 911. Mr. Knowles said that in areas for which the Kentucky State Police handles 911 calls, local law enforcement seems to be more dissatisfied with services provided than are fire and emergency officials.


Representative Palumbo noted the disparity in a local landline fee of up to $4.25 per month and the 70 cents per month state wireless fee.


Representative Steele noted that the fee for postpaid cell phone plans is 70 cents per month but that 39 cents per month is collected for prepaid cell phone plans. He asked why there would be such a difference. Mr. Knowles said that prepaid providers send 70 cents per $50 of valued use, which works out to much less than 70 cents per device.


Senator Schickel commented that the report focused on funding but that the issue of service is important. The dispatch unit can be remote from the community, which can reduce the quality of service. This is one of the most important reports he has read; it concerns life and death matters.


Senator Schickel asked what percentage of PSAPs are operated by boards versus under police chiefs or sheriffs. Mr. Knowles said that this would be difficult to determine but that staff would look into this.


Senator Schickel asked if there are any reports on the information on callers that is stored in 911 systems. Mr. Knowles said that staff did not look at this for the report but realizes that it is an issue.


Senator Schickel cited the recent example in Pennsylvania of a problem in getting assistance to an Amish school. Dispatchers were located far away and were not familiar with the community. The Louisville system looks like a good mix. Mr. Knowles said the Jefferson County system provides for five cities in the county outside Louisville to have their own dispatchers.


Referring to the presentation, Senator Stine said the CMRS Board is to review the rate of the wireless 911 fee every 24 months but that there appear to have been no reports on this since 2005. She asked if staff are aware whether such reviews occurred. Mr. Knowles deferred to CMRS officials.


Referring to the presentation, Senator Stine noted that the CMRS Board had not yet determined the cost and contributions of different revenue sources as required by Senate Bill 119. She asked why the delay. Mr. Knowles deferred to CMRS officials.


Representative Palumbo read from page x of the report: “Program Review staff examined the options for a point of sale fee and found that it distributes the fee burden unevenly and has opportunities for potentially large losses of revenue.” In response to her question, Mr. Knowles said that staff stood by that statement.


Referring to the presentation, Senator McGaha asked whether those not contracting with the state police were incurring funding surpluses. Mr. Knowles said that staff did not contact all PSAPs. Of those contacted, only state police contractors have surpluses. Senator McGaha asked why this would be the case. Mr. Knowles said that the state police do not collect the full amount for the services provided. In response to a question from Senator McGaha, Major Peercy said that some of the agreements with localities are old and have not kept up as salaries and fringe benefits of personnel have increased.


Senator McGaha asked why the state police have not been successful in renegotiating contracts. Major Peercy said that local governments have balked at paying higher costs and that the state police did not want to discontinue a service that is part of the state police’s mission. In response to a question from Senator McGaha, Major Peercy said that, in effect, funding has to be supplemented with general funds.


Senator McGaha asked if the state police generally charge less than what local governments would have to pay otherwise. Major Peercy replied yes; the state police only charge for the extra dispatchers that would have to be used.


Senator Schickel asked if the state police plan to get more involved in dispatching. Major Peercy replied that the state police does not advertise the provision of 911 services but has always agreed to provide such services when requested. This would have to be rethought if a large county requested services.


Representative Simpson said that a major cost driver is equipment upgrades. He asked what equipment costs are and whether these costs are being passed along. Major Peercy replied that it costs $64,000 per quarter in maintenance fees for dispatch systems and $450,000 per year in maintenance for the record management system. Overall, it is approximately $700,000 per year. The costs are not passed on. In response to a question from Representative Simpson, Major Peercy said that equipment was last replaced in 2005 and 2006.


Representative Simpson asked whether he should advise Covington to request that 911 services be provided through the state police. Major Peercy said yes.


Senator Higdon quoted from the report that there is no true 911 system. He asked for an elaboration. Mr. Knowles said that each local jurisdiction has its own fees and funding. There is no central oversight. PSAPs may not be able to assist and communicate with each other. Complete coverage exists, but it is not uniform.


Senator Higdon noted that there are more cell phone calls to 911 than from landlines but that landlines pay more. Mr. Knowles said that this is an issue to consider.


Representative Palumbo asked why the report distributed today is two pages shorter than the report sent earlier to committee members. Mr. Knowles said the only substantive revision was to remove text on Texas’s point-of-sale figures, which were subsequently found to be unreliable. Otherwise, duplicative material was removed. He said that staff could provide the list of revisions.


Senator Stine quoted from KRS 65.7529 on the requirements of board to submit annual audit reports and to “develop standards and protocols for the improvement and increased efficiency of 911 services in Kentucky.” She asked if there was any evidence that CMRS was meeting the requirements of the statute. Mr. Knowles said that there have been grants to promote increased services. The board is only authorized to audit the use of wireless funds and not the landline funds. The Program Review draft report covers the lack of required reporting by CMRS.


Senator McGaha asked whether the state police system has the capability to bridge the gaps among local systems. Major Peercy said that broadcasts can be made on the state mutual aid system. Systems deal with misrouted calls by telephoning.


Mr. Barrows responded to the report, which he said communicates the complicated landscape of the 911 system, demonstrates a comprehensive understanding of the issues, and makes strong, achievable recommendations to the General Assembly and state and local agencies. The mantra of CMRS is that each cell phone device should support the system the same by paying the same 911 fee of 70 cents per device monthly. Currently, the contribution for cell phones using prepaid plans is 38.5 cents per month; the contribution for cell phones using postpaid plans is 70 cents.


Prior to 1998, local governments implemented local 911 service with the entire cost paid locally. Most localities established a dedicated funding source, typically a fee on landline phone bills. Currently, 110 counties have such fees, which range from $.50 to $4.50 per month. This generates $30 million to $35 million per year in total. State support of 911 began in 1998 with the establishment of a 70-cents-per-month cell phone fee. For the 2003 to 2005 period, many providers stopped remitting fees on prepaid services, which cost CMRS millions of dollars. In July 2006, amendments to the 1998 state law created a dual system of calculating the 911 fee on wireless devices based on whether a phone plan was prepaid or postpaid. The amendments have cost the CMRS fund $15 million in total. Annual CMRS fund revenue stabilized at $24 million in FY 2009.


The goal for 911 funding is to re-establish the equity and uniformity between prepaid and postpaid devices. There are three options to do this. 1) Amend KRS 65.7635(1)(b) to change the amount by which a prepaid provider’s total revenue is divided to a number that would produce the same revenue per device as for postpaid plans, and grant authority to revise this number as necessary to maintain equivalent revenue per device. 2) Adopt another method of collecting revenue from prepaid devices, for example, a retail point of sale system. 3) Repeal the 2006 amendments and return to the original process whereby all providers remitted 70 cents per cell phone per month.


He provided statistics to illustrate the disparity in funding sources for 911 service. From 2001 to 2011, the number of wireline subscribers in Kentucky decreased from 2.3 million to 1.85 million; the number of wireless subscribers increased from 1.28 million to 3.38 million. Wireline users now account for 35 percent of 911 calls; cell phone users account for 65 percent. However, only 15 percent of total 911 revenue in Kentucky comes from the state wireless fee. The remainder comes from local fees (40 percent), typically landline fees, and local general funds (45 percent).


Senator Stine said that 911 is one of the primary interfaces that people have with government. Based on the existing statute and Senate Bill 119, it does not seem that the issues are being addressed that there be consistency in service and that everyone is treated equally. She asked for a status report, specifically why the reporting requirements of SB 119 have not been met. Mr. Barrows replied that the substance of what CMRS has accomplished is as good as any state. He said that audit reports were being done and that annual reports have been done since 2010. He is a proponent of Senate Bill 119 but noted that he has a staff of three.


Senator Stine noted that there are some jurisdictions with surpluses. Mr. Barrows said that they are few in number and surpluses are likely due to local funding.


Senator Stine asked whether the board has reported on the reviews of the rate of the wireless 911 fee that the statute requires be done every 24 months. Mr. Barrows said that no reviews have been located since 2005. The thinking was that increasing the fee would be the only reason to do a report, and a fee increase seemed unlikely.


Senator McGaha asked what percentages of the 3.6 million cell phones in Kentucky are prepaid and postpaid. Mr. Barrows said that the industry standard is that 20 to 21 percent of cell phones are prepaid. This percentage is increasing due to consumers moving from postpaid to prepaid.


In response to a question from Senator McGaha, Mr. Barrows said that if prepaid plans paid the 70 cent rate, it would generate an additional $3 million to $3.5 million.


Representative Palumbo noted that 21 states, including Kentucky’s border states, have adopted point of sale. She asked why the board did not adopt Option C from the statute when it realized that the state was losing money. Mr. Barrows said it was 20 states and District of Columbia and that there are variations among states. It would be a competitive advantage for Kentucky retailers not to have point of sale if surrounding states did. The board did not know that the state was losing $15 million until recently. A point of sale plan by the board would not have gotten through the administrative regulation process. Where point of sale has been adopted, it has not produced an equivalent amount.


Representative Palumbo said that she did not necessarily agree with this. She agreed that the two phones ought to pay the same towards the system. Mr. Barrows said the current situation would not exist if the formula in the 2006 amendment was not faulty.


Representative Palumbo noted that point of sales collects up front. Mr. Barrows said that there would be leakage among the 20,000 retailers that would be collecting the fee. There is a lack of good information from other states. It is simpler to collect from the relatively small number of wholesalers. If doing point of sale, the system has to be adequate and changeable. The board should be given the authority to change the formula.


In response to a question from Representative Palumbo, Mr. Barrows said that the board has read the staff report and has looked at the staff recommendations. Mr. Barrows said that the Board has been in litigation with a company that stopped paying after the 2006 changes because they wanted the board to adopt a regulation on point of sale. Mr. Barrows said he cannot comment on the board’s behalf.


Senator Higdon said that the staff report said that 15 companies are not paying the fee. Mr. Barrows said that only three companies are not paying; the other 12 companies are not doing business in Kentucky.


Upon motion by Representative Palumbo and second by Representative Mills, the report 911 Services and Funding: Accountability and Financial Information Should Be Improved was adopted by roll call vote.


Impact Plus

Senator Higdon commented that he had experienced difficulties communicating with the department regarding Impact Plus. Mr. Hall apologized for any issue there has been, and said that the department is as open as possible.


Senator Higdon asked for clarification that providers contract with the Department and not CHFS. Mr. Hall said that the department is the only provider that has an agreement with Medicaid, which subcontracts to those who provide the services. The department follows Kentucky contract law in dealing with subcontractors.


Senator McGaha asked for an explanation of what is going on with managed care and reimbursement of providers. He is hearing from providers who have not been paid and are having trouble remaining in business. Mr. Hall said that the department has been paid much less than expected. So far, $34,889 has been paid and payments should have been closer to $600,000. When the department gets a bill, it is being processed within 3 days. Senator McGaha asked if the MCOs are not sending the bills to the department. Mr. Hall said that is correct. The providers are having difficulty with billing so there is a need for more training.


In response to a question from Senator McGaha, Mr. Hall said that he did not know if MCOs are paid monthly. Senator McGaha said that without quick action, there will be not Impact Plus services in his part of the state. Mr. Hall said that this would be a tragedy.


Senator Higdon said that MCOs were paid November 1 for a month’s of services. His assumption is that MCOs took the first month’s payment but started making payments with the December 1 payment.


Senator Higdon said that according to a 2000 report, there were 214 providers providing services to about 6,400 children. He asked how many there are now. Ms. Kelly replied that there are 56 providers serving 5,764 children enrolled in the Impact Plus program.


In response to questions from Senator Higdon, Ms. Kelly said there are no legal requirements for frequency of audits. Audits are done every 24 months on a rotating basis. There is a scoring rubric based on the regulation, the program manual, and the contract that the provider signed. The rubric is broken down into an overall comprehensive score, and then a clinical review and a billing review. The standards do not change each year and are based on the regulation, the contract, and the program manual.


Senator Higdon asked how something could be classified as a clerical error in one case and fraud in another. Mr. Hall said that the department does not determine fraud. Senator Higdon asked how there can an allegation of fraud against a service provider if the department does not determine fraud. Mr. Hall said that if a billing does not make sense, it would be referred to the Office of Inspector General (OIG). Senator Higdon asked whether the department waits for action by OIG before eliminating a provider. Mr. Hall said that the department is not involved in looking for fraud. The most important thing is that children continue to receive services. Senator Higdon asked whether there are children not getting services due to an agency being terminated. Ms. Kelly said that everyone got a new provider.


In response to a question from Senator Higdon, Mr. Hall said the department follows KRS 45A in terminating subcontractors. The department has due process rights but the providers do not. Senator Higdon asked whether negotiation can occur with CHFS directly and bypass Impact Plus. Mr. Hall said not for Impact Plus.


Senator Higdon asked which MCOs are not paying promptly and whether prompt pay laws come into play. Mr. Hall said that he was unsure.


Representative Steele asked how penalties are determined for slow payment and whether the department works with MCOs to get payment. Mr. Hall said that the department works with MCOs on payments daily.


Representative Steele asked how subcontractors are chosen and how it is decided which ones not to keep. He said that some have better reports than others and are still dismissed. Ms. Dunnigan said that the department follows contract language and contract protocol in KRS 45A that all state government follows. Mr. Hall said that the department does not just pick and choose contractors. Ms. Dunnigan said that credentialing is part of the contracting process; there is ongoing monitoring of credentialing.


Senator Higdon asked what actions are taken when problems are found. Ms. Kelly said that the department does a review with the rubric score. A corrective action plan may or may not be issued. If issued, the department works with the provider on corrective action. In response to a question from Senator Higdon, Ms. Kelly said that a comprehensive score of less than 85 percent would raise a red flag. In addition, if either the clinical or the billing review scores below 80 percent, a corrective action plan will be issued.


 In response to questions from Senator Higdon, Mr. Hall said that a contract would be terminated because of a lack of follow-through on a corrective action plan. Ms. Kelly said that cases in which significant deficits are found in a review would be referred to OIG. Mr. Hall said that if the department decides to terminate a contract, the provider would be given the recommended 30-day notice. Ms. Kelly said this has happened only twice in the history of the program.


Ms. Dunnigan said there is confusion among providers regarding the new procedures for submitting electronic forms and paperwork to MCOs. The department is working with MCOs to sponsor group training on this.


Senator Smith said that a corrective action plan presumes that a situation can be rectified. He asked whether providers always get the opportunity to make corrections. Mr. Hall said not always. Senator Smith said that the approach should be the same for all vendors. He asked whether some current vendors have missteps for which others have been terminated. Mr. Hall said no. Senator Smith asked if everyone gets a chance to make a case. Ms. Dunnigan said not the two vendors with significant problems related to children receiving services. Senator Smith asked whether there should not be a presumption of innocence. Mr. Hall said the contracts allow them to be terminated within 30 days. Senator Smith said it appears there was a change in a longstanding policy; everyone should have the opportunity to be heard.


Representative Palumbo said that she has issues with the department’s procedures and how some providers were terminated. She has read notes from department staff regarding termination of an agency, and the notes were not honest. She feels that the agency was let go to be replaced by another provider. She requested that the Program Review and Investigations Committee receive reports on the providers that have replaced the terminated agencies and the reasons the department is giving for termination. Senator Higdon and Representative Steele agreed with this reasonable request.


Representative Mills asked that financial information also be submitted.


Senator Higdon said that the department should submit to the committee within 30 days: the final review for each of the two terminated subcontractors, the previous reviews for the two terminated subcontractors, the most recent review for each of the current 56 subcontractors, and information on payments to subcontractors.


Representative Palumbo said that one of the terminated providers had perfect records in the past and suddenly there seem to be major problems.


Representative Mills asked whether the department reviews diagnostic codes. Ms. Kelly said that this is part of the eligibility requirements.


Representative King asked whether a contractor or employee of a contractor could be reinstated if nothing is found to be wrong. Ms. Dunnigan said that there is no prohibition on reenrollment. Therapists could work for another agency.


Representative King said that is has been extremely frustrating for her to get responses from Impact Plus. Ms. Dunnigan said that she would look into that.


            The meeting was adjourned at 1:12 p.m.