Chapter 21A — HEALTH-RELATED COMMODITIES AND SERVICES

Sec. 21A.1. Scope of Chapter.

Sec. 21A.2. Membership in Group Purchasing Organizations.

Sec. 21A.3. Department of Public Health Managed Care Contracts.

Sec. 21A.4. Behavioral Health and Public Health Residential Care and Treatment Services.

(a) Agreements for Commodities and Services for the Department of Public Health (“DPH”) may be entered into and procured under the requirements of this Chapter 21A where expressly stated in this Chapter.

(b) Unless expressly stated otherwise in Chapter 21A, all of the requirements of Chapter 21, as well as any other applicable Charter or Code requirement, including but not limited to the contract and lease limitations imposed by Section 9.118 of the Charter, shall apply to Commodities and Services contracts procured by DPH under the authority of this Chapter 21A.

(c) As used in this Chapter 21A, all words shall have the same meanings as in Chapter 21.

(d) For purposes of this Chapter 21A, a Healthcare Group Purchasing Organization, or “Healthcare GPO,” is an entity that leverages the purchasing power of healthcare institutions to obtain discounts on goods and services from suppliers.

(Added by Ord. 142-15, File No. 150567, App. 8/6/2015, Eff. 9/5/2015; amended by Ord. 33-20, File No. 191237, App. 2/21/2020, Eff. 3/23/2020)

(Former Sec. 21A.1 added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(a) Findings.

(1) In 1997, the City authorized the Department of Public Health (“DPH”) to join the two Healthcare GPOs to obtain discounts on goods and materials.

(2) Healthcare GPOs obtain cost savings by pooling their members’ purchasing power and negotiating lower prices from their participating vendors. Healthcare GPOs also provide their members with cost savings by conducting a competitive bidding process for some – though not all – of the goods and services offered by their suppliers.

(3) Membership in Healthcare GPOs allows DPH to employ a streamlined process for procuring goods and services, thereby reducing administrative burdens, facilitating improved quality of care, and saving DPH millions of dollars each fiscal year.

(b) The Director of Health (“Director”) is hereby authorized to enter into and execute written membership agreements with one or more Healthcare GPOs, and pay any applicable fees for membership of DPH in any Healthcare GPO in which it becomes a member.

(c) Upon obtaining membership in a Healthcare GPO, DPH is authorized to utilize all programs and services offered to members of the Healthcare GPO, including but not limited to purchasing programs that allow DPH to purchase Commodities and/or Professional Services from a vendor or distributor that is under contract with a Healthcare GPO in which DPH is a member (“GPO Supplier”).

(d) The Director, or person designated in writing by the Director, is also authorized to enter into and execute written agreements, including but not limited to pricing commitments, lease agreements, and finance agreements, with GPO Suppliers and/or their financing entities, for the acquisition, lease, or financing of equipment, Commodities, information technology products and related services, equipment maintenance, and General and Professional Services.

(e) Notwithstanding Section 21.1 of the Administrative Code or any other provision of the Municipal Code, DPH may enter into contracts under the authority of subsections (c) and (d) without adhering to the requirements of Section 21.1 or any other competitive procurement requirements.

(f) The Director shall evaluate all Healthcare GPO memberships every five years beginning in 2025, and provide the Health Commission with a report of such evaluation by January 31, 2025, and by January 31 of every fifth year thereafter to determine which Healthcare GPO membership(s) offer DPH the best value.

(Added as Sec. 15.104 by Ord. 29-97, App. 2/7/97; amended by Ord. 337-99, File No. 992043, App. 12/30/99; redesignated as Sec. 21.43 and amended by Ord. 176-14, File No. 140596, App. 8/7/2014, Eff. 9/6/2014; redesignated and amended by Ord. 142-15, File No. 150567, App. 8/6/2015, Eff. 9/5/2015; amended by Ord. 33-20, File No. 191237, App. 2/21/2020, Eff. 3/23/2020)

96, App.](http://www.sfbos.org/ftp/uploadedfiles/bdsupvrs/ordinances14/o0176-14.pdf) 8/7/2014, Eff. 9/6/2014; redesignated and amended by Ord. 142-15, File No. 150567, App. 8/6/2015, Eff. 9/5/2015; amended by Ord. 33-20, File No. 191237, App. 2/21/2020, Eff. 3/23/2020)

(Former Sec. 21A.2 added by Ord. 83-00, File No. 000392, App. 5/12/2000; amended by Ord. 210-02, File No. 020784, App. 10/25/2002; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(a) Findings.

(1) The federal government and state government continue to increase the proportion of safety net health care services provided under a managed care model, by, among other things, transitioning Seniors and Persons with Disabilities to Medi-Cal managed care, expanding Medi-Cal managed care eligibility to individuals below 138% of the federal poverty level, establishing pilot programs to transition those persons who are dually eligible for Medicare and Medicaid into managed care, and establishing state health exchanges to provide federally-subsidized health insurance for persons with incomes up to 400% of the poverty level.

(2) The Department of Public Health's ("DPH") mission includes the provision of high-quality health care to all San Franciscans, including the uninsured and low-income individuals who access health care through federally- and state-subsidized programs. Historically, DPH has fulfilled its mission by providing services through a fee-for-service structure or in partnership with the San Francisco Health Authority, also known as the San Francisco Health Plan ("SFHP"), authorized by California Welfare and Institutions Code § 14087.36 and Administrative Code Chapter 69.

(3) Under the shift to a managed care-focused system for delivery of health care services, to participate as a provider in certain programs, DPH will need to be a contracted partner with insurers. Otherwise, current and prospective DPH clients will not have the option of selecting DPH as a provider. If DPH cannot offer itself as a contracted provider, continuity of care will be disrupted for those who have long histories with DPH health care providers, and DPH will lose revenue due to reduced patient care.

(4) Both the federal and state governments acknowledge through policy and legislative actions that county health care providers are expected to increase services to individuals newly eligible for insurance under the Affordable Care Act ("ACA") (see, 42 U.S.C.A. § 18091 and 26 U.S.C.A. § 5000A). In 2017, the federal government plans to reduce the Disproportionate Share Hospital program, which has been a source of funding for safety net providers, like DPH, for many years. Similarly, under AB85 (June 27, 2013), the State of California now recoups indigent health care realignment allocations, funds that formerly went to counties. In both cases, providers such as DPH are expected to replace those revenues by increasing enrollment of persons who are newly eligible for managed care insurance programs.

(5) Shortly after the passage of the ACA, DPH entered into a year-long Integrated Delivery System planning process, which concluded that to remain financially viable under ACA, DPH must transition from a "provider of last resort" to become a "provider of choice" to retain clients newly enrolled in insurance under the ACA.

(6) In February 2013, DPH and the Controller's Office jointly launched a Health Reform Readiness Assessment project and engaged Health Management Associates, a consulting firm specializing in healthcare. The Controller's summary report of that effort, on file with the Clerk of the Board of Supervisors in File No. 141097, concluded that in order to maintain excellence in patient care and financial health, DPH should focus on increasing "the number of insured and covered clients, by maximizing the current Medi-Cal expansion," and "contracts with health plans." The Health Reform Readiness Assessment also recommended that DPH increase the number of insured patients in its network by 30,000 over the next five years. The timely ability to enter into and modify managed care contracts is critical to achieving these goals.

(7) In July 2013, the City convened the 41-member Universal Healthcare Council ("UHC"), engaging a wide range of stakeholders to examine San Francisco's implementation of the ACA. The UHC Final Report 2013, on file with the Clerk of the Board of Supervisors in File No. 141097, adopted guiding principles, including: a commitment to "full implementation of the ACA in San Francisco;" "maximizing enrollment of San Franciscans into the new insurance opportunities created by the ACA;" and sharing responsibility among all sectors of society, including City government, to "reduc[e] the number of uninsured residents and ensur[e] access to care." To meet these expectations, DPH must be given the administrative tools to fully engage in implementation of the ACA.

(8) The ACA requires the creation of state health exchanges to provide options for insurance coverage, including for the formerly uninsured. To meet this mandate, the State of California established Covered California, which provides a marketplace where individuals can purchase health insurance. Health insurers providing coverage under Covered California must offer health plans compliant with federal and state regulations under the ACA and subsequent legislation.

(9) Covered California provides the key means for individuals to comply with the individual mandate in the ACA. Through Healthy San Francisco and other programs, DPH has historically provided health care for a large number of individuals, who are now required to have health insurance under the ACA's individual mandate. For many of these individuals, obtaining insurance through Covered California is the only affordable way to comply.

(10) The only way to become a health care provider to individuals insured under Covered California is to enter into contractual arrangements with one or more of the state-authorized insurance providers. Prior to the ACA, DPH served approximately 15,000 individuals who could be eligible for Covered California subsidized insurance. If those individuals choose to enroll in insurance under Covered California, they will no longer be able to receive primary care, preventative care, specialty care, and other services from DPH and will be forced to move to another provider, unless DPH enters into contracts with those insurance companies.

ximately 15,000 individuals who could be eligible for Covered California subsidized insurance. If those individuals choose to enroll in insurance under Covered California, they will no longer be able to receive primary care, preventative care, specialty care, and other services from DPH and will be forced to move to another provider, unless DPH enters into contracts with those insurance companies.

(11) To participate in the new health care markets, DPH needs flexibility to enter into and modify managed care contractual arrangements. Most insurers operate with an annual open enrollment period. Time between these open enrollment periods is limited and health care contracts are often negotiated and executed in a relatively short time period. Additionally, the submission of claims can take up to 12 months, then it takes three (3) to six (6) months to aggregate and analyze the data in order to enter into meaningful contract negotiations. Under standard City procedures for approving such contracts, DPH will struggle to meet timelines expected in the industry, which could limit its ability to retain patients and revenue.

(b) Acting under Charter Section 9.118, the Board of Supervisors authorizes the Director of Health to enter into contracts anticipated to generate over $1 million in reimbursements or revenue to the City to provide health care services at DPH facilities, including, but not limited to, primary care, specialty services, hospital services, and behavioral health services. These contracts may include fee-for-service arrangements, fully capitated arrangements where DPH receives fixed monthly payments per individual and is financially responsible for managing health care costs of its patients, or a hybrid of the two.. [1 ] The DPH annual budget shall show the revenues from the contracts as capitation rates or patient fees (collectively, “Rates of Reimbursement”). To be eligible for approval under this Section 21A.3, the contract shall terminate no later than December 31, 2028, and shall be subject to the review and approval of the Controller for consistency with the terms of this Section 21A.3. Notwithstanding the forgoing, [1 ] the following contracts shall not require Controller review under this subsection (b): (1) contracts for the provision of services to Medi-Cal members, the rates of which are set by the California Department Health Care Services (“DHCS”); and 2) contracts for the provision of services to members of SFHP, such as Healthy Workers Health Maintenance Organization, the rates of which are determined by the actual costs of medical, mental health, and pharmacy services, plus the latest cost inflator as published by the Centers for Medicare & Medicaid.

(c) Establishing Rates of Reimbursement.

(1) Rates of Reimbursement for health services in contracts entered into under this Section 21A.3 shall be equal to or higher than either (A) Fee for Service: DHCS published Medi-Cal fee for service rates, selected and adjusted as needed to align with the pending contract specifications; or (B) Capitated Rates: the average of per-member-per month rates for Medi-Cal managed care for Aid Codes Family and Medi-Cal Expansion, or successor provisions, set by DHCS as authorized by federal and state law.

(2) For the purposes of determining whether the Capitation Rates in contracts are equal to, or exceed the minima specified in subsection (c)(1) of this this [1 ] Section 21A.3, in addition to the gross capitation rates specified by DHCS, the Controller shall consider net payments the City will receive

for health services provided by DPH after removing benefit carve outs, capitation splits, and/or administrative fees and other amounts that state law allows the SFHP or other provider to withhold, as applicable. For either Fee for Service or Capitated Rate contracts, the Controller has the option of utilizing other relevant comparison rates or benchmarks which may be obtained via outside healthcare expertise, or through additional research by the Office of the Controller.

(d) No later than February 1 of each year, the Controller, in consultation with DPH, shall report on the review of reimbursement rates it has conducted for the preceding year. The Controller shall also periodically, in consultation with DPH, review payment rates relative to available industry standards and identify opportunities to improve future contract terms.

(e) The Director of Health shall provide quarterly reports between September 1, 2015 and December 1, 2028 to the Health Commission of the contracts approved under this Section 21A.3, and the aggregate amount of reimbursement and revenue generated. The Director of Health shall provide annual reports, no later than September 1, 2015, September 1, 2016, September 1, 2017, September 1, 2018, September 1, 2019, September 1, 2020,

September 1, 2021, September 1, 2022, September 1, 2023, September 1, 2024, September 1, 2025, September 1, 2026 [1] September 1, 2027, and September 1, 2028 to the Mayor and the Board of Supervisors, identifying the contracts approved and the aggregate amount of reimbursement and revenue generated.

(Added as Sec. 21.44 by Ord. 245-14, File No. 141097, App. 12/4/2014, Eff. 1/3/2015; redesignated and amended by Ord. 151-16, File No. 160634, App. 8/1/2016, Eff. 8/31/2016; amended by Ord. 24-19, File No. 180926, App. 2/15/2019, Eff. 3/18/2019; Ord. 168-23, File No. 230650, App. 7/28/2023, Eff. 8/28/2023)

(Former Sec. 21A.3 added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

CODIFICATION NOTE

1. So in Ord. 168-23.

(a) Findings.

(1) On November 4, 2008, the voters approved Proposition T, the “Treatment on Demand Act” requiring the Department of Public Health (“DPH”) to provide an adequate level of free and low-cost medical substance abuse services and residential treatment slots commensurate with the demand for these services. The Treatment on Demand Act requires the City to be flexible in providing various treatment modalities for both residential substance abuse treatment services and medical substance abuse treatment services.

(2) In 2019, the City enacted Ordinance No. 300-19, establishing Mental Health SF, a program intended to improve access to mental health and substance use treatment by expanding services to help residents who are experiencing homelessness and reduce excessive wait times and provide adequate resources at every stage of treatment.

(3) To carry out the Treatment on Demand Act and Mental Health SF program, DPH contracts with entities that provide residential care and treatment services, including but not limited to residential care facilities, board and care facilities, mental rehabilitation centers, withdrawal

management facilities, and residential treatment facilities. Such facilities provide beds, behavioral health treatment, medication, and counseling for DPH patients with behavioral health and substance abuse needs.

(4) DPH also assists patients with other urgent public health needs, such as patients with infectious or contagious diseases in need of a temporary isolation or quarantine location, and domestic violence victims in need of temporary housing. Since those circumstances necessarily require a rapid response, DPH must quickly procure services to address those needs from entities that provide public health residential care services. For purposes of this Section, “Services” means the behavioral health residential care and treatment services and the public health residential care services described in subsections (a)(3) and (a)(4).

(5) DPH continues to experience waitlists for behavioral health residential care and treatment programs, including for example, as long as four months, depending on the category of bed, based on a June 2020 DPH study. The waitlists for such programs negatively affect the populations served by DPH because people may not be able to access care at the moment they are ready to engage in it, and may continue to experience harm associated with their mental health or substance use disorder while awaiting care. Additionally, patients in need of isolation or quarantine rooms may wait in higher-level acute care facilities if adequate spaces are not readily and quickly available, occupying treatment and care spaces for patients in need of

acute care.

(6) Without the authority to quickly procure Services from readily available Service Providers, as defined herein, DPH will continue to experience waitlists for behavioral health treatment programs and services and will not be able to quickly place patients with urgent public health needs in an appropriate location. When there are increases in demand for such Services, DPH needs to be able to respond rapidly to meet the demand. For purposes of this Section 21A.4, “Service Provider” means any entity that provides either behavioral health residential care and treatment Services or public health residential care Services, as described in this subsection (a).

(7) The Board of Supervisors hereby finds that the public interest is served by authorizing DPH to timely and efficiently enter into agreements with Service Providers to meet the imminent need for behavioral and public health needs of City residents. In light of this public purpose, DPH may procure such Services without adhering to the competitive solicitation requirements of the Administrative Code, the City’s Local Business Enterprise requirements in Chapter 14B of the Administrative Code, or any other applicable competitive solicitation requirement.

(b) The Director of Health, or the Director’s designee, is hereby authorized to purchase Services from Service Providers directly, without the approval of the Purchaser, and without adhering to the requirements of Section 21.1 or Chapter 14B of the Administrative Code, or any other applicable competitive procurement requirement.

(c) By January 31 of each year, DPH shall submit to the Health Commission an annual report that includes the following information for each agreement that DPH executed during the prior fiscal year under the authority of subsection (b): the name of the Service Provider; the Services to be provided under the agreement; the amount of funds conveyed; the duration of the agreement; and any measurable outcomes of the agreement.

(d) This Section 21A.4 shall expire by operation of law five years from its effective date. Upon expiration of this Section, the City Attorney is authorized to cause this Section to be removed from the Administrative Code.

(Added by Ord. 37-24, File No. 240015, App. 2/29/2024, Eff. 3/31/2024)

(Former Sec. 21A.4 added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; amended by Ord. 210-02, File No. 020784, App. 10/25/2002; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 210-02, File No. 020784, App. 10/25/2002; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Former Sec. 21A.13 renumbered as Sec. 21A.14 by Ord. 210-02, File No. 020784, App. 10/25/2002)

(Added by Ord. 83-00, File No. 00392, App. 5/12/2000; amended by Ord. 210-02, File No. 010784, App. 10/25/2002; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)

(Added by Ord. 83-00, File No. 000392, App. 5/12/2000; amended by Ord. 210-02, File No. 020784, App. 10/25/2002; repealed by Ord. 171-03. File No. 030422, App. 7/3/2003)