Federally qualified health centers: mission spend ratio.
What changed between versions
New abatement procedure (Section 14138.37(d)): After an administrative penalty is imposed, an FQHC has two years to abate the violation. If it comes into compliance with the 90-percent mission spend ratio and reaches an agreement with the department to spend the penalty amount on mission-directed expenses within two years, it does not have to pay the penalty. The department must conduct annual audits of FQHCs under such agreements. If the FQHC is not in substantial compliance, it must pay the penalty (reduced by compliant spending) within two working days plus administrative costs.
The waiver term was changed from 'one year from the date of issuance' to 'one calendar year.' A new provision authorizes the department to provide an alternative mission spend ratio to adjust for imminently planned capital improvements if the assessed penalty would prevent the improvement from moving forward during the next calendar year.
New appeal provision allowing an FQHC that disputes a determination or assessment to request a hearing pursuant to Section 131071 within 10 working days, with the administrative penalty payable only after all appeals are exhausted and the department's position is upheld. Appeals run concurrently with the abatement period.
All key implementation dates shifted one year later: first annual report deadline moved from June 30, 2026 to June 30, 2027; the department's deadline to adopt its own methodology moved from January 1, 2027 to January 1, 2028; the IRS Form 990 reference year changed from 2024 to 2025 taxable year; the interim calculation year changed from 2026 to 2027.
The definition of 'mission-directed expenses' was expanded to explicitly include expenses required for an FQHC to provide culturally and linguistically competent care, and to explicitly exclude administrative and managerial expenses, fundraising expenses, and profits. A new paragraph requires the department to further define the scope of mission-directed expenses by regulation.
New provision in the mission spend ratio definition: when calculating the ratio, the department shall exclude from both total expenses and total revenue any penalties paid under the article or expenditures made based on an agreed-upon plan with the department, preventing a double penalty effect.
New provision specifying that money in the Mission Spend Ratio Penalty Account, upon legislative appropriation, shall be used to implement the article, with the intent that unused funds be directed toward future legislative efforts relating to clinic worker training, recruitment, and retention.
New reporting requirement: FQHCs that have entered into an abatement agreement or received an alternative mission spend ratio must submit documentation demonstrating compliance with the agreed terms as part of their annual report.
New provision stating it is the intent of the Legislature that the department make every effort to minimize the administrative burden on FQHCs from any reporting requirement necessary to carry out the article.
The tribal exemption was expanded to include 'urban Indian organization' in addition to 'tribe or tribal organization' receiving funding under the federal Indian Self-Determination and Education Assistance Act.
New legislative finding (e) explicitly stating the intent that no more than 10 percent of an FQHC's revenue may be profit or spent on administrative costs and other costs that do not contribute to the clinic's charitable mission.