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Date: |
October 27, 2026 |
23 |
Title
Authorize Pass-through Payment Model for Sheriff’s Amendment to Existing Administrative Services Organization Contract (Districts: All)
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Overview
The San Diego County Sheriff's Office (Sheriff's Office) requests the Board of Supervisors (Board) authorize implementation of a pass-through payment model through the amendment to the existing United Healthcare agreement authorized by the Board on March 24, 2026. On March 24, 2026, the Board authorized amendment of the existing Administrative Services Organization (ASO) contract with United HealthCare Services, Inc. (AmeriChoice) to include the Sheriff's Office scope of work. During contract negotiations, the parties determined that Action 3.2, Item 3(c), requiring that the County of San Diego (County) not be responsible for cost overruns, cannot be implemented within the proposed ASO structure because AmeriChoice does not provide healthcare services or control the cost of medical care. The Sheriff's Office is legally responsible for ensuring that incarcerated individuals receive constitutionally and statutorily required medical care. As a result, the County remains responsible for funding medically necessary healthcare services provided to individuals in custody. Unlike the previous model under NaphCare, AmeriChoice will not provide medical care, determine medical necessity, control the utilization of medical services, or negotiate provider reimbursement rates on behalf of the County. Instead, AmeriChoice will act as a billing agent to support California Advancing and Innovating Medi-Cal (CalAIM) billing, a State program that allows reimbursement for certain healthcare services provided to justice involved individuals prior to release.
Costs of care are driven by the medical needs of the incarcerated population and the services provided by hospitals and specialty providers. Under the passthrough payment model proposed by Sheriff, because AmeriChoice neither controls the delivery of care nor receives financial benefit when costs of care increase, they are not responsible for cost overruns. This framework will allow the Sheriff's Office to implement a claims administration model capable of supporting Medi-Cal, CalAIM, and Medi-Cal County Inmate Program (MCIP) reimbursement while maintaining existing Board oversight of expenditures and future budget requests. Approval of the proposed ASO pass-through payment model would supersede Action 3.2, Item 3(c), adopted by the Board on March 24, 2026, because the final negotiated structure requires that provider claims be funded by the County and administered by AmeriChoice.
Body
Recommendation by Sheriff:
1) Authorize implementation of the Administrative Services Organization (ASO) pass-through payment model for the Sheriff's Office through the existing contract with United HealthCare Services, Inc. dba AmeriChoice, whereby provider payments are funded by the County and administered by the contractor, and take all actions necessary to implement the approved model.
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Equity Impact Statement
This action advances health equity for incarcerated persons by ensuring timely access to medically necessary care and maximizing reimbursement for services. The transition to a claims‑based model improves consistency, accuracy, and timeliness in processing medical services for all incarcerated people, including those with complex medical conditions who are most affected by delayed or denied care. This action also strengthens continuity of care and enables full participation in Medi-Cal and California Advancing and Innovating Medi-Cal (CalAIM) programs, which directly benefits the County's incarcerated population.
Sustainability Impact Statement
Today's board actions support the County's Sustainability Goals of providing just and equitable access and protecting the health and wellbeing of everyone in the region. Transitioning to United HealthCare Services, Inc. AmeriChoice's comprehensive claims‑processing platform reduces compliance risk, prevents avoidable reimbursement losses tied to filing deadlines, and creates a resilient administrative system capable of adapting to evolving State requirements. The rescission of Action 3.2, Item 3(c) removes a structural barrier to implementing a functional Administrative Services Organization model, ensuring that costs driven by patient need can be managed transparently within existing budget oversight processes. These changes support a more sustainable correctional healthcare system that maintains service continuity, protects public resources, and ensures responsible stewardship of taxpayer funds.
Fiscal Impact
Funds for the United HealthCare Services, Inc. (AmeriChoice) billing services contract are included in the Fiscal Year 2026-27 Operational Plan for the San Diego County Sheriff’s Office (Sheriff’s Office). If approved, this action will allow the Sheriff's Office to transition billing and claims administration services from NaphCare to AmeriChoice and implement Medi‑Cal, California Advancing and Innovating Medi-Cal (CalAIM), and Medi-Cal County Inmate Program (MCIP) billing activities necessary to obtain available State and Federal reimbursement for eligible services.
Timely implementation is important because reimbursable CalAIM services became available on October 1, 2026. Delays in implementing claims administration and billing services may reduce the County's ability to recover eligible State and Federal reimbursement revenue due to claim filing deadlines and reimbursement penalties associated with late submissions. While the exact amount of future reimbursement cannot be estimated at this time, delayed implementation increases the risk of avoidable revenue loss.
Failure to implement a billing contractor capable of administering CalAIM claims may reduce the County's ability to obtain reimbursement for eligible healthcare services provided to incarcerated individuals. Future year costs associated with ongoing operational needs, off-site hospital costs, and related medical claims will be included in future Operational Plans for the Sheriff's Office. There will be no additional staff years associated with this action.
Business Impact Statement
N/A
Advisory Board Statement
N/A
Background
The San Diego Sheriff’s Office (Sheriff's Office) is transitioning away from the current contract with NaphCare, which relies on a medical referral structure and has limited administrative capability to manage off-site medical claims. Over the past several years, the Sheriff’s Office has experienced significant increases in hospitalizations, specialty care usage, and higher acuity medical conditions among individuals in custody. These factors directly influence the cost of care and create unavoidable variability in medical care costs. NaphCare is unable to perform California Advancing and Innovating Medi-Cal (CalAIM) compliant billing or submit Medi-Cal pre-release claims, resulting in missed reimbursement opportunities and increased compliance risk. United HealthCare Services, Inc. (AmeriChoice), possesses the systems, staffing, operational infrastructure, and technical capabilities necessary to support CalAIM and Medi-Cal County Inmate Program (MCIP) billing functions. These capabilities position AmeriChoice to immediately support the Sheriff's Office transition to a comprehensive claims administration model. Unlike the prior model, AmeriChoice will not provide healthcare services or direct clinical care decisions.
The Sheriff’s Office is effectively moving from a medical referral model to a comprehensive billing and claims processing model. AmeriChoice has the infrastructure, systems integration, and experience to process claims accurately, ensure timely reimbursement, and manage utilization oversight. AmeriChoice does not profit when costs of care increase; instead, increased expenditures reflect increases in medical need among the incarcerated population. Unlike the previous NaphCare structure, AmeriChoice will not provide medical services. AmeriChoice's role is limited to administration of claims, provider reimbursement, utilization review, and Medi-Cal and CalAIM billing activities. Sheriff's Office will negotiate provider and hospital reimbursement rates directly in order to achieve the most favorable pricing and avoid application of commercial network rate structures that may otherwise result from negotiations conducted through AmeriChoice.
AmeriChoice's compensation under the Administrative Services Organization (ASO) contract consists of a fixed administrative services component for claims administration, provider reimbursement processing, utilization review, reporting, and billing activities. Provider payments for medical care delivered to incarcerated individuals are separate pass-through expenditures funded by the County and administered by AmeriChoice on the County's behalf. As a result, AmeriChoice's compensation is not tied to the volume or cost of medical services provided.
Payments made to hospitals and other healthcare providers represent pass-through expenditures for medical care delivered to individuals in custody and do not constitute revenue or profit to AmeriChoice. Accordingly, increases in medical expenditures reflect changes in patient acuity and healthcare utilization rather than contractor performance.
Since the March 24, 2026 (3) Board of Supervisors (Board) action, the Sheriff's Office, in coordination with the Department of Purchasing and Contracting, Health and Human Services Agency, and County Counsel, have worked with AmeriChoice to negotiate an amendment to the existing ASO contract. Throughout the negotiation process, the parties made substantial progress on operational, billing, reporting, and administrative requirements. However, during the most recent contract negotiations, AmeriChoice advised the County of San Diego (County) that it could not accept responsibility for costs of care that are driven by patient acuity, medical necessity, and utilization of healthcare services. As a result, the parties were unable to finalize the amendment under the requirements established in Action 3.2, Item 3(c), which required that the County not be responsible for cost overruns.
Approving a pass-through payment model will allow successful negotiation of a contract amendment with Americhoice, which will enable CalAIM reimbursement for detentions related medical care. The restriction on County responsibility for costs of care is incompatible with the realities of medical service delivery, where expenditures are determined by patient needs and not vendor actions. Rescinding Action 3.2, Item 3(c) is necessary because the cost of care for individuals in custody is driven by clinical need and population acuity, not vendor performance, and cannot be absorbed by an administrative services contractor, whose primary function is billing. AmeriChoice does not profit from increases in medical expenditures and all costs reflect medically necessary services delivered to incarcerated individuals. Maintaining the current restriction will prevent successful execution of the amendment and jeopardize the County’s ability to process claims and recover eligible revenue.
The County’s ability to bill for CalAIM services is critical. Under Medi-Cal requirements, claims filed more than six months after the month of service are subject to financial reductions: 25 percent less reimbursement for claims submitted 7-9 months after service, 50 percent less reimbursement for submissions 10-12 months after service, and full denial for claims older than one year. Some Managed Care Plans administering CalAIM restrict filing further to 180 days from the service date. These timelines underscore the importance of a timely and capable claims administration partner, as delays in transitioning administrative services would expose the County to significant avoidable revenue loss.
Under Medi-Cal rules, the initial claim submission window is 6 months following the end of the month in which the services were provided. If a claim is submitted late without a legally verified "Good Cause" exception, reimbursement is subject to sliding scale financial penalties:
|
Months Since Service Month |
Reimbursement Penalty |
Financial Impact |
|
0 to 6 months |
None |
100% full payment |
|
7 to 9 months |
25% Reduction |
Only 75% of the claim is paid |
|
10 to 12 months |
50% Reduction |
Only 50% of the claim is paid |
|
Over 12 months |
100% Reduction (Denial) |
$0 / Full Denial (Lost revenue) |
The Sheriff’s Office is requesting action on this item to prevent adverse financial impact which provides claim submission penalties based on the above timeframes. Reimbursable CalAIM services in the detention system began on October 1, 2026. Timely submission of claims is necessary to maximize available State and Federal reimbursement and minimize reductions associated with applicable filing deadlines.
Approving a passthrough payment model, which will supersede Action 3.2, Item 3(c), will allow the Sheriff’s Office to complete the ASO amendment, transition away from NaphCare’s referral-based structure, implement CalAIM billing as required by the State, reduce fiscal and compliance risk, and ensure continuity of medical care for individuals in custody. This action will also align the Sheriff’s Office with countywide administrative standards already in place within HHSA’s AmeriChoice managed ASO contract.
Linkage To The County Of San Diego Strategic Plan
This action supports the County’s Equity and Justice Strategic Initiatives by supporting access to healthcare services for individuals in custody and improving continuity of care. This action also supports the Sustainability Strategic Initiative by maximizing available reimbursement opportunities, reducing compliance risk, and promoting responsible stewardship of public resources.
Respectfully submitted,
Kelly A. Martinez
Sheriff
Attachment(s)
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