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(Conditionally Rpld.)

A. Beginning on October 1, 1996, the basic children’s medical services program is established to provide grants to hospitals that exclusively serve the medical needs of children or that operate programs designed primarily for children. The director of the department of health services, pursuant to an intergovernmental agreement with the director of the Arizona health care cost containment system and subject to the availability of monies, shall implement and operate this program only to the extent that funding is available and has been specifically dedicated for the program.

B. To receive a grant under this section, a hospital shall submit an application as prescribed by the director of the department of health services in a request for proposal that indicates to the director’s satisfaction that the applicant agrees to:

1. Use grant program monies to enhance the applicant’s provision of additional medical services to children and to improve the applicant’s ability to deliver inpatient, outpatient and specialized clinical services to indigent, uninsured or underinsured children who are not eligible to receive services under this article.

2. Establish and enforce a sliding fee scale for children who are provided services with grant monies.

3. Account for monies collected pursuant to paragraph 2 of this subsection separately from all other income it receives and to report this income on a quarterly basis to the administration.

4. Use the grant to supplement monies already available to the applicant.

5. Match the grant as prescribed by the director by rule with private monies the applicant has pledged from private sources. The director shall waive this requirement if the applicant is seeking the grant to qualify for a private or public grant for the delivery of inpatient, outpatient or specialized clinical care of indigent, uninsured or underinsured children who are not eligible to receive services under this article.

6. Provide a mechanism to ensure that grant program monies are not used for children who are eligible for services under this article.

7. Not use grant monies to fund the provision of emergency room services.

C. By contract, the director of the department of health services shall require a grantee to:

1. Annually account for all expenditures it makes with grant program monies during the previous year.

2. Agree to cooperate with any audits or reviews conducted by this state.

3. Agree to the requirements of this section and other conditions the director determines to be necessary for the effective use of grant program monies.

D. The director of the department of health services may limit either or both the grant amount per contract or the number of contracts awarded. In awarding contracts to qualified applicants the director shall consider:

1. The amount of monies available for the grant program.

2. The need for grant monies in the area served by the applicant as stated by the applicant in the response to the request for proposals and as researched by the administration.

3. The number of children estimated to be served by the applicant with grant program monies.

4. The services that will be provided or made available with grant program monies.

5. The percentages of grant monies that the applicant indicates will be reserved for administrative expenditures, direct service expenditures and medical care personnel costs.

6. The financial and programmatic ability of the applicant to meet the contract’s requirements.

E. If the department of health services determines that a hospital has used grant monies in violation of this section, it shall prohibit that hospital from receiving additional grant program monies until the hospital reimburses the department. The department shall impose an interest penalty as prescribed by the director of the department of health services by rule. The director shall deposit, pursuant to sections 35-146 and 35-147, penalties collected under this section in the medically needy account of the tobacco tax and health care fund.

F. The director of the department of health services may expend monies from the medically needy account of the tobacco tax and health care fund for the purpose of funding evaluations of the grant program established by this section. The director shall ensure that any evaluation is structured to meet at least the base requirements prescribed in Section 36-2907.07.

G. The director of the department of health services may expend monies from the medically needy account of the tobacco tax and health care fund for administrative costs associated with the establishment or the operation of the grant program. The amount withdrawn annually for grant program administrative costs shall not exceed two percent of the sum of any transfers of monies and any appropriation of monies for the specified purpose of supporting the nonentitlement basic children’s medical services program established in this section.

H. The department of health services shall directly administer the grant program and all contracts established pursuant to this section. The director of the department of health services shall publish rules pursuant to Title 41, Chapter 6 for the grant program before the issuance of the initial grant program request for proposals. The director of the department of health services and the contractor shall sign a contract before the transmission of any tobacco tax and health care fund monies to the contractor.

I. In administering the basic children’s medical services program and awarding contracts established pursuant to this section, the director of the department of health services shall seek to efficiently and effectively coordinate the delivery of services provided through the program with services provided through other programs, including those established pursuant to sections 36-2907.05, 36-2907.06 and 36-2912. The director shall seek to ensure that this coordination results in providing for either or both the coverage of additional children or the provision of additional medically necessary services to children instead of supplanting existing service opportunities or duplicating existing programs with no attendant increase in coverage.

J. For the purposes of this section, "grant program" refers to the basic children’s medical services program.