A BILL TO BE ENTITLED
AN ACT modifying certain requirements pertaining to local management entities/managed care organizations.
The General Assembly of North Carolina enacts:
SECTION 1.(a)  The Department of Health and Human Services (DHHS) shall specify a single, nationally recognized, standardized electronic format to be used by all local management entities/managed care organizations (LME/MCOs) when submitting encounter data to DHHS. LME/MCOs must submit to DHHS encounter data, consisting of records of claims payments made to providers, for Medicaid and State‑funded mental health, intellectual and developmental disabilities, and substance abuse disorder services utilizing the single, nationally recognized, standardized electronic format specified by DHHS.
SECTION 1.(b)  DHHS may use encounter data submitted by LME/MCOs for all of the following purposes:
(1)	Setting LME/MCO capitation rates.
(2)	Measuring the quality of services managed by LME/MCOs.
(3)	Assuring compliance with State and federal regulations.
(4)	Conducting oversight and audit functions.
(5)	Other purposes determined necessary by DHHS.
SECTION 1.(c)  DHHS shall work with LME/MCOs to ensure that the process for submitting encounter claims through NCTracks is successful.
SECTION 1.(d)  DHHS shall report to the Joint Legislative Oversight Committee on Health and Human Services regarding the status of subsection (a) of this section on or before February 1, 2018.
SECTION 2.  G.S. 112.1(a)(39) reads as rewritten:
"(39)	Develop and use standard contracts for all local management entity/managed care organizations for operation of the 1915(b)/(c) Medicaid Waiver and management of State appropriations and federal block grant funds that requires compliance by each LME/MCO with all provisions of the contracts to operate the 1915(b)/(c) Medicaid Waiver and manage State appropriations and federal block grant funds and with all applicable provisions of State and federal law. Each of these standard contracts must include quality outcome measures for mental health, developmental disabilities, and substance use disorders."
SECTION 3.  G.S. 122C‑3 reads as rewritten:
"§ 122C‑3.  Definitions.
The following definitions apply in this Chapter:
(1)	"Area authority" means the area mental health, developmental disabilities, and substance abuse authority.
(2)	"Area board" means the area mental health, developmental disabilities, and substance abuse board that is the governing body for the area authority, local management entity, or local management entity/managed care organization.
(2a)	"Area director" means the administrative head of the area authority, local management entity, or local management entity/managed care organization appointed pursuant to G.S. 122C‑121.
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(2b)	"Board of county commissioners" includes the participating boards of county commissioners for multicounty area authorities.
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(5)	"Catchment area" means the geographic part of the State served by a specific area authority.
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(14)	"Facility" means any person at one location whose primary purpose is to provide services for the care, treatment, habilitation, or rehabilitation of the mentally ill, the developmentally disabled, or substance abusers, and includes:
a.	An "area facility", which is a facility that is operated by or under contract with the area authority. For the purposes of this subparagraph, a contract is a contract, memorandum of understanding, or other written agreement whereby the facility agrees to provide services to one or more clients of the area authority. Area facilities may also be licensable facilities in accordance with Article 2 of this Chapter. A State facility is not an area facility;
b.	A "licensable facility", which is a facility that provides services to individuals who are mentally ill, developmentally disabled, or substance abusers for one or more minors or for two or more adults. These services shall be day services offered to the same individual for a period of three hours or more during a 24‑hour period, or residential services provided for 24 consecutive hours or more. Facilities for individuals who are substance abusers include chemical dependency facilities;
c.	A "private facility", which is a facility that is either a licensable facility or a special unit of a general hospital or a part of either in which the specific service provided is not covered under the terms of a contract with an area authority;
d.	The psychiatric service of the University of North Carolina Hospitals at Chapel Hill;
e.	A "residential facility", which is a 24‑hour facility that is not a hospital, including a group home;
f.	A "State facility", which is a facility that is operated by the Secretary;
g.	A "24‑hour facility", which is a facility that provides a structured living environment and services for a period of 24 consecutive hours or more and includes hospitals that are facilities under this Chapter; and
h.	A Veterans Administration facility or part thereof that provides services for the care, treatment, habilitation, or rehabilitation of the mentally ill, the developmentally disabled, or substance abusers.
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(20b)	"Local management entity" or "LME" means an area authority.
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…."
SECTION 4.(a)  G.S. 122C‑115.4(b) reads as rewritten:
"(b)	The primary functions of an LME are designated in this subsection and shall not be conducted by any other entity unless an LME obtains the prior written approval of the Secretary to voluntarily enter into a contract with that entity under subsection (c) of this section. The primary functions include all of the following:
(1)	Access for all citizens to the core services and administrative functions described in G.S. 122C‑2. In particular, this shall include the implementation of a 24‑hour a day, seven‑day a week screening, triage, and referral process and a uniform portal of entry into care.
(2)	Provider monitoring, technical assistance, capacity development, and quality control. If at anytime the LME has reasonable cause to believe a violation of licensure rules has occurred, the LME shall make a referral to the Division of Health Service Regulation. If at anytime the LME has reasonable cause to believe the abuse, neglect, or exploitation of a client has occurred, the LME shall make a referral to the local Department of Social Services, Child Protective Services Program, or Adult Protective Services Program.
(3)	Utilization management, utilization review, and determination of the appropriate level and intensity of services. An LME may participate in the development of person centered plans for any consumer and shall monitor the implementation of person centered plans. An LME shall review and approve person centered plans for consumers who receive State‑funded services and shall conduct concurrent reviews of person centered plans for consumers in the LME's catchment area who receive Medicaid funded services.
(4)	Authorization of the utilization of State psychiatric hospitals and other State facilities. Authorization of eligibility determination requests for recipients under a CAP‑MR/DD waiver.
(5)	Care coordination and quality management. This function involves individual client care decisions at critical treatment junctures to assure clients' care is coordinated, received when needed, likely to produce good outcomes, and is neither too little nor too much service to achieve the desired results. Care coordination is sometimes referred to as "care management." Care coordination shall be provided by clinically trained professionals with the authority and skills necessary to determine appropriate diagnosis and treatment, approve treatment and service plans, when necessary to link clients to higher levels of care quickly and efficiently, to facilitate the resolution of disagreements between providers and clinicians, and to consult with providers, clinicians, case managers, and utilization reviewers. Care coordination activities for high‑risk/high‑cost consumers or consumers at a critical treatment juncture include the following:
a.	Assisting with the development of a single care plan for individual clients, including participating in child and family teams around the development of plans for children and adolescents.
b.	Addressing difficult situations for clients or providers.
c.	Consulting with providers regarding difficult or unusual care situations.
d.	Ensuring that consumers are linked to primary care providers to address the consumer's physical health needs.
e.	Coordinating client transitions from one service to another.
f.	Conducting customer service interventions.
g.	Assuring clients are given additional, fewer, or different services as client needs increase, lessen, or change.
h.	Interfacing with utilization reviewers and case managers.
i.	Providing leadership on the development and use of communication protocols.
j.	Participating in the development of discharge plans for consumers being discharged from a State facility or other inpatient setting who have not been previously served in the community.
(6)	Community collaboration and consumer affairs including a process to protect consumer rights, an appeals process, and support of an effective consumer and family advisory committee.
(7)	Financial management and accountability for the use of State and local funds and information management for the delivery of publicly funded services.
(8)	Each LME shall develop a waiting list of persons with intellectual or developmental disabilities that are waiting for specific services. The LME shall develop the list in accordance with rules adopted by the Secretary to ensure that waiting list data are collected consistently across LMEs. Each LME shall report this data annually to the Department. The data collected should include numbers of persons who are:
a.	Waiting for residential services.
b.	Potentially eligible for CAP‑MRDD.
c.	In need of other services and supports funded from State appropriations to or allocations from the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, including CAP‑MRDD.
Subject to all applicable State and federal laws and rules established by the Secretary and the Commission, nothing in this subsection shall be construed to preempt or supersede the regulatory or licensing authority of other State or local departments or divisions."
SECTION 4.(b)  This section applies to contracts entered into on or after the effective date of this act.
SECTION 5.  G.S. 122C‑116 reads as rewritten:
"§ 122C‑116.  Status of area authority.
	An area authority is a local political subdivision of the State established by counties pursuant to G.S. 122C‑115(a) and (c) for the management and delivery of services for individuals with mental illness, intellectual or other developmental disabilities, and substance use disorders under a 1915(b)/(c) Medicaid Waiver. An area authority is a local management entity that must perform the local management entity functions described in G.S. 122C‑115.4 and monitor and manage all public resources that may be available for mental health, intellectual and developmental disabilities, and substance use disorder services, including federal block grants, federal funding for Medicaid and Health Choice, and all other public funding sources as described in Section 1(a) of S.L. 2011‑264 and in compliance with G.S. 122C‑111 and G.S. 112.1(a)(39). LMEs are the single entities authorized to operate and manage the 1915(b)/(c) Medicaid Waiver, which operation and management must be performed in accordance with a standard contract developed by the Secretary under the authority of G.S. 122C‑112.1(a)(39) that is subject to the enforcement provisions of G.S. 122C‑124.1, G.S. 122C‑124.2, and all other applicable provisions of this Chapter. LMEs are the sole entities authorized to enter into the contract described in G.S. 122C‑124.2(g)(2) and G.S. 112.1(a)(39) for the operation of the 1915(b)/(c) Medicaid Waiver. A local management entity that is under contract with the Department to operate the combined Medicaid Waiver program authorized under Section 1915(b) and Section 1915(c) of the Social Security Act shall be known as a "local management entity/managed care organization" or "LME/MCO."
	"
SECTION 6.  G.S. 122C‑117(a) reads as rewritten:
"(a)	The area authority shall do all of the following:
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(7)	Appoint an area director in accordance with G.S. 122C‑121. All provisions of Chapter 122C of the General Statutes that apply to the area director also apply to the administrative head of the area authority, LME, or LME/MCO, regardless if (i) the administrative head uses the title "CEO" or any other name or title assigned to him or her by the area authority, LME, or LME/MCO and (ii) a contract, memorandum of understanding, or other agreement in effect between the Department and the area authority, LME, or LME/MCO refers to the administrative head as the "CEO" or any other name or title.
…."
SECTION 7.(a)  G.S. 122C‑118.1 reads as rewritten:
"§ 122C‑118.1.  Structure of area board.
(a)	An area board shall have no fewer than 11 and no more than 21 voting members.
(a1)	Unless the Secretary approves an alternative board appointment process pursuant to subsection (a2) of this section, the board of county commissioners, or the boards of county commissioners within the area, shall appoint members in a manner that ensures participation from each of the constituent counties of the area authority and is consistent with the requirements provided in subsection (b) of this section. If the board or boards fail to comply with the requirements of subsection (b) of this section, the Secretary shall appoint members of the unrepresented categories.
(a2)	The boards of county commissioners within a multicounty area with a catchment population of at least 1,250,000 shall have the option to appoint members of the area board through a process other than as required by subsection (a1) of this section if at least three‑quarters of the constituent counties each adopt a resolution to that effect and obtain written approval from the Secretary. When seeking written approval from the Secretary to use an alternative board appointment process, the area authority shall submit to the Secretary its proposed board appointment process and copies of county resolutions requesting approval of the proposed board appointment process. In cases in which two or more area authorities seek to merge or consolidate, if one or more of these area authorities received approval by the Secretary for an alternative board appointment process prior to the merger or consolidation, all prior approvals for an alternative board appointment process become void 30 days after the effective date of the merger or consolidation. The newly merged or consolidated area authority and the boards of county commissioners within the multicounty area may appoint members of the area board through a process other than as provided in subsection (a1) of this section if at least three‑quarters of the constituent counties each adopt a resolution to that effect and obtain written approval from the Secretary in the manner prescribed by this subsection. No area board shall be exempt from, and the Secretary shall not waive, any provision of this section except as provided in subdivision (a1) of this section with respect to the board appointment process.
(a3)	A member of the board may be removed with or without cause by the appointing authority. The area board may declare vacant the office of an appointed member who does not attend three consecutive scheduled meetings without justifiable excuse. The chair of the area board shall notify the appropriate appointing authority of any vacancy. Vacancies on the board shall be filled by the appointing authority before the end of the term of the vacated seat or within 90 days after the vacancy, whichever occurs first, and the appointments shall be for the remainder of the unexpired term.
(b)	Within the maximum membership provided in subsection (a) of this section, the membership of the area board shall reside within the catchment area and be composed as follows:
(1)	At least one member who is a current county commissioner.
(2)	The chair of the local Consumer and Family Advisory Committee (CFAC) or the chair's designee.
(3)	At least one family member of the local CFAC, as recommended by the local CFAC, representing the interests of the following:
a.	Individuals with mental illness.
b.	Individuals in recovery from addiction.
c.	Individuals with intellectual or other developmental disabilities.
(4)	At least one openly declared consumer member of the local CFAC, as recommended by the local CFAC, representing the interests of the following:
a.	Individuals with mental illness.
b.	Individuals with intellectual or other developmental disabilities.
c.	Individuals in recovery from addiction.
(5)	An individual with health care expertise and experience in the fields of mental health, intellectual or other developmental disabilities, or substance abuse services.
(6)	An individual with health care administration expertise consistent with the scale and nature of the managed care organization.
(7)	An individual with financial expertise consistent with the scale and nature of the managed care organization.
(8)	An individual with health insurance, health plan administration, or business expertise, or any combination of expertise in these areas.
(9)	An individual with social services expertise and experience in the fields of mental health, intellectual or other developmental disabilities, or substance abuse services.
(10)	An attorney with health care expertise.
(11)	A member who represents the general public and who is not employed by or affiliated with the Department of Health and Human Services, as appointed by the Secretary.
(12)	The President of the LME/MCO Provider Council or the President's designee to serve as a nonvoting member who shall participate only in Board activities that are open to the public.
(13)	An administrator of a hospital providing mental health, developmental disabilities, and substance abuse emergency services to serve as a nonvoting member who shall participate only in Board activities that are open to the public.
Except as provided in subdivisions (12) and (13) of this subsection, an individual that contracts with a local management entity (LME) for the delivery of mental health, developmental disabilities, and substance abuse services may not serve on the board of the LME for the period during which the contract for services is in effect. No person registered as a lobbyist under Chapter 120C of the General Statutes shall be appointed to or serve on an area board. Of the members described in subdivisions (2) through (4) of this subsection, the boards of county commissioners shall ensure there is at least one member representing the interest of each of the following: (i) individuals with mental illness, (ii) individuals with intellectual or other developmental disabilities, and (iii) individuals in recovery from addiction.
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(d1)	Beginning on July 1, 2017, each LME/MCO annually shall notify the Secretary of all of the following:
(1)	The area board appointment process, the process for filling vacancies on the area board, and the appointing authority for each area board position.
(2)	The membership of the area board.
(3)	The county of residence of each member.
(4)	How the membership composition requirements of subsection (b) of this section are being met.
(5)	The term of office of the chair of the area board and each member.
(6)	The LME/MCO's compliance status with training requirements for its board members.
(7)	The board's policies and procedures for conducting the area director's annual performance review, including at least all of the following:
a.	The criteria used to conduct the review.
b.	The criteria used to award bonuses to the area director and other employees.
c.	The process for soliciting comments from county commissioners.
d.	The results of the area director's most recent performance evaluation.
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SECTION 7.(b)  Any area board that does not meet the composition requirements of G.S. 122C‑118.1(b) on the effective date of this act shall comply with these composition requirements no later than October 1, 2017.
SECTION 8.  Part 4 of Article 4 of Chapter 122C of the General Statutes is amended by adding a new section to read:
"§ 122C‑147.3.  LME/MCO use of funds.
LME/MCOs shall use funds only for purposes related to their functions and responsibilities under this Chapter, including operation of the combined Medicaid Waiver program authorized under section 1915(b) and 1915(c) of the Social Security Act, or to carry out functions and responsibilities required by State law, federal law, or contract with the Department of Health and Human Services. A violation of this section constitutes noncompliance for purposes of G.S. 122C‑124.2(c)."
SECTION 9.  G.S. 122C‑124.2(c) reads as rewritten:
"(c)	If the Secretary (i) does not provide a local management entity/managed care organization with the certification of compliance required by this section based upon the LME/MCO's failure to comply with any of the requirements specified in subdivisions (1) through (3) of subsection (b) of this section or (ii) determines that an LME/MCO has failed to comply with G.S. 122C‑147.3, the Secretary shall do the following:
(1)	Prepare a written notice informing the LME/MCO of the provisions of subdivision (1), (2), or (3) of subsection (c) of this section or the provisions of G.S. 122C‑147.3 with which the LME/MCO is deemed not to be in compliance and the reasons for the determination of noncompliance.
(2)	Cause the notice of the noncompliance to be delivered to the LME/MCO.
(3)	Not later than 10 days after the Secretary's notice of noncompliance is provided to the LME/MCO, assign the Contract of the noncompliant LME/MCO to a compliant LME/MCO.
(4)	Oversee the transfer of the operations and contracts from the noncompliant LME/MCO to the compliant LME/MCO in accordance with the provisions in subsection (e) of this section."
SECTION 10.(a)  G.S. 122C‑121 reads as rewritten:
"§ 122C‑121.  Area director.
(a)	The area director is a full‑time employee of the area board, shall serve full‑time at the pleasure of the area board, and shall be appointed by the area board in accordance with G.S. 122C‑117(7). The area director shall not be employed in any other capacity or enter into any other contract for the performance of services while serving as area director. As used in this subsection, "employee" means an individual and does not include a corporation, a partnership, a limited liability corporation, or any other business association.
(a1)	The area board shall establish the area director's salary under Article 3 of Chapter 126 of the General Statutes. Notwithstanding G.S. 126‑9(b), an area director may be paid a salary that is in excess of the salary ranges established by the State Human Resources Commission so long as all of the following requirements are met:
(1)	The board must submit to the Director of the Office of State Human Resources and the Secretary a request to exceed the maximum of the applicable salary range. The request must be supported by documentation of comparable salaries in comparable operations within a comparable region of North Carolina and shall also include the specific amount the board proposes to pay the director. For the purpose of this subdivision, the Secretary shall determine what constitutes comparable operations within a comparable region of North Carolina.
(2)	The board must obtain prior written approval for the proposed salary from both the Director of the Office of State Human Resources and the Secretary. In no instance shall the area board, the Director of the Office of State Human Resources, or the Secretary approve a salary for an area director that is higher than the maximum of the applicable salary range if it exceeds by more than thirty percent (30%) the average salary of the area directors of the remaining LME/MCOs, as determined by the Secretary. If the Secretary determines that an area director's salary is higher than the maximum of the applicable salary range and exceeds by more than thirty percent (30%) the average salary of the area directors of the remaining LME/MCOs, that area director's salary shall be reduced to achieve compliance with this subdivision within 60 days after such determination by the Secretary.
The requirements of subdivisions (1) and (2) of this subsection may not be waived by the area board, the Director of the Office of State Human Resources, or the Secretary regardless of whether the State Human Resources Commission has made a determination under G.S. 126‑11 that all or a portion of the board's personnel system has been determined to be substantially equivalent to, and therefore exempt from, the provisions of Chapter 126 of the General Statutes.
(a2)	The area board shall not authorize any salary adjustment for an area director that results in a salary above the normal allowable salary range unless all of the following requirements are met:
(1)	The board must submit to the Director of the Office of State Human Resources and the Secretary a request to exceed the maximum of the applicable salary range. The request must be supported by documentation of comparable salaries in comparable operations within a comparable region of North Carolina and shall also include the specific amount of the salary adjustment the board proposes to pay the area director and the resulting salary. For the purpose of this subdivision, the Secretary shall determine what constitutes comparable operations within a comparable region of North Carolina.
(2)	The board must obtain prior written approval for the proposed salary adjustment from both the Director of the Office of State Human Resources and the Secretary. In no instance shall the area board, the Director of the Office of State Human Resources, or the Secretary approve a salary adjustment for an area director that results in a salary that is higher than the maximum of the applicable salary range if it exceeds by more than thirty percent (30%) the average salary of the area directors of the remaining LME/MCOs, as determined by the Secretary. If the Secretary determines that an area director's salary is higher than the maximum of the applicable salary range and exceeds by more than thirty percent (30%) the average salary of the area directors of the remaining LME/MCOs, that area director's salary shall be reduced to achieve compliance with this subdivision within 60 days after such determination by the Secretary.
The requirements of subdivisions (1) and (2) of this subsection may not be waived by the area board, the Director of the Office of State Human Resources, or the Secretary regardless of whether the State Human Resources Commission has made a determination under G.S. 126‑11 that all or a portion of the board's personnel system has been determined to be substantially equivalent to, and therefore exempt from, the provisions of Chapter 126 of the General Statutes.
(a3)	If the Secretary determines that the compensation of an area director, including salary, benefits, and bonuses, exceeds the limitations specified in this section, the area board shall prospectively reduce that area director's compensation, including salary, benefits, and bonuses, to achieve compliance with this section within 60 days after such determination by the Secretary. If an area board does not bring an area director's compensation, including salary, benefits, and bonuses, into compliance with this section within the 60‑day period, the Secretary shall notify, in writing, the area board and the applicable participating boards of county commissioners of the area authority specifically how the area director's compensation, including salary, benefits, and bonuses, does not comply with this section and that the area board must bring the area director's compensation, including salary, benefits, and bonuses, into compliance with this section or a caretaker board of directors will be appointed as provided in subsection (c) of G.S. 122C‑124.1. The area board shall have 60 days from the date it receives notice under this subsection to bring the area director's compensation, including salary, benefits, and bonuses, into compliance with this section.
If, at the end of the 60‑day notice period, the area board has not brought the area director's compensation, including salary, benefits, and bonuses, into compliance with this section, the Secretary shall appoint a caretaker board of directors as provided in subsection (c) of G.S. 122C‑124.1. The Secretary may assign any or all of the powers and duties of the area director or of the area board to the caretaker board as the Secretary deems necessary and appropriate. In addition to performing all of these powers and duties, the caretaker board shall bring the area director's compensation, including salary, benefits, and bonuses, into compliance with this section. The Secretary may terminate the area director when it appoints a caretaker board. Neither party to any applicable employment contract shall be entitled to damages. After a caretaker board has been appointed, the General Assembly shall consider, at its next regular session, the future governance of the identified area authority.
(a4)	The area board shall not provide the area director with any benefits or bonuses that are not also provided by the area board to all permanent employees of the area program, except that the area board may, in its discretion, offer severance benefits, relocation expenses, or both, to an applicant for the position of area director as an incentive for the applicant to accept an offer of employment. The area director shall be reimbursed only for allowable employment‑related expenses at the same rate and in the same manner as other employees of the area program.
(a5)	The total compensation provided or recommended to be provided by each area board to its area director, including salary, benefits, and bonuses, shall be subject to review and written approval by the Director of the Office of State Human Resources and the Secretary on at least an annual basis. An area board shall not increase compensation to an area director without prior written approval for the increase from the Director of the Office of State Human Resources and the Secretary.
(a6)	Annually on June 30, each area board shall submit to the Secretary and the Director of the Office of State Human Resources a copy of all current employment agreements, employment contracts, and any amendments to those agreements and contracts that the area board has entered into with its area director, as well as any other documents relating to the area director's compensation, including salary, benefits, and bonuses.
(b)	The Secretary and the area board shall evaluate annually the area director for performance based on criteria established by the Secretary and the area board. In conducting the evaluation, the Secretary and the area board shall consider comments from the board of county commissioners.
(c)	The area director is the administrative head of the area program. In addition to the duties under G.S. 122C‑111, the area director shall:
(1)	Appoint, supervise, and terminate area program staff.
(2)	Administer area authority services.
(3)	Develop the budget of the area authority for review by the area board.
(4)	Provide information and advice to the board of county commissioners through the county manager.
(5)	Act as liaison between the area authority and the Department.
(6)	Ensure compliance by the area authority with the following operational requirements of the area authority:
a.	Maintain disability specific infrastructure and competency to address the clinical, treatment, rehabilitative, habilitative, and support needs of all disabilities covered by the 1915(b)/(c) Medicaid Waiver.
b.	Maintain administrative and clinical functions, including requirements for customer service, quality management, due process, provider network development, information systems, financial reporting, and staffing.
c.	Maintain full accountability for all aspects of Medicaid Waiver operations and for meeting all contract requirements specified by the Department. The Department shall not require LMEs to subcontract any managed care functions or nonservice activities to other entities. However, LMEs that choose to subcontract managed care functions to other entities will be limited to the following:
1.	Information systems.
2.	Customer service (including call center) operations.
3.	Claims processing.
4.	Provider, enrollment, credentialing, and monitoring.
5.	Professional services.
6.	Treatment Plan development.
7.	Referral to services.
(d)	Except when specifically waived by the Secretary, the area director shall meet all the following minimum qualifications:
(1)	Masters degree.
(2)	Related experience.
(3)	Management experience.
(4)	Any other qualifications required under G.S. 122C‑120.1.
(e)	The appointment of the area director shall be based upon the recommendation of at least two candidates by a search committee of the area board. The search committee shall include a consumer board member, a county commissioner, and an appointee of the Secretary. The Secretary may waive this requirement when appointment of the area director results from the merger or consolidation of LME/MCOs.
(f)	The area board may not terminate the area director without 30 days' prior written notice to the Secretary, unless the termination (i) results from the merger or consolidation of LME/MCOs or (ii) is directed by the Secretary."
SECTION 10.(b)  The limitations on compensation, including salary, benefits, and bonuses specified in G.S. 122C‑121, as amended by subsection (a) of this section, apply to currently employed area directors hired prior to the effective date of this act as well as to area directors hired on or after the effective date of this act. If the Secretary of the Department of Health and Human Services determines that the compensation, including salary, benefits, and bonuses, of a currently employed area director hired prior to the effective date of this act exceeds the limitations specified in G.S. 122C‑121, as amended by subsection (a) of this section, the area board shall prospectively reduce that area director's compensation, including salary, benefits, and bonuses, to achieve compliance with G.S. 122C‑121, as amended by subsection (a) of this section, within 60 days after such determination by the Secretary. If an area board does not comply with the directive of this subsection to reduce an area director's compensation, including salary, benefits, and bonuses, to achieve compliance with G.S. 122C‑121, as amended by subsection (a) of this section, within the 60‑day period prescribed by this subsection, the Secretary shall appoint a caretaker board of directors, as prescribed in subsection (a3) of G.S. 122C‑121, as amended by subsection (a) of this section.
SECTION 10.(c)  Each LME/MCO shall, within 30 day after the effective date of this act, submit to the Secretary and the Director of the Office of State Human Resources a copy of all current employment agreements, employment contracts, and any amendments to those agreements and contracts that the LME/MCO has entered into with its area director, as well as any other documents relating to the area director's compensation, including salary, benefits, and bonuses.
SECTION 11.  G.S. 122C‑141(d)(1) reads as rewritten:
"(1)	The public provider must meet all the provider qualifications as defined by rules adopted by the Commission."
SECTION 12.  G.S. 122C‑154 reads as rewritten:
"§ 122C‑154.  Personnel.
(a)	Employees under the direct supervision of the area director are employees of the area authority. For the purpose of personnel administration, Chapter 126 of the General Statutes applies unless otherwise provided in this Article.
(b)	Notwithstanding G.S. 126‑9(b), an employee of an area authority may be paid a salary that is in excess of the salary ranges established by the State Human Resources Commission so long as all of the following requirements are met:
(1)	The area board must submit to the Director of the Office of State Human Resources and the Secretary a request to exceed the maximum of the applicable salary range. The request must be supported by documentation of comparable salaries in comparable operations within a comparable region of North Carolina and shall also include the specific amount the board proposes to pay the employee. For the purpose of this subdivision, the Secretary shall determine what constitutes comparable operations within a comparable region of North Carolina.
(2)	The area board must obtain prior written approval for the proposed salary from both the Director of the Office of State Human Resources and the Secretary.
The requirements of subdivisions (1) and (2) of this subsection may not be waived by the area board, the Director of the Office of State Human Resources, or the Secretary regardless of whether the State Human Resources Commission has made a determination under G.S. 126‑11 that all or a portion of the board's personnel system has been determined to be substantially equivalent to, and therefore exempt from, the provisions of Chapter 126 of the General Statutes.
(c)	The area board shall not authorize any salary adjustment that results in a salary above the normal allowable salary range unless all of the following requirements are met:
(1)	The area board must submit to the Director of the Office of State Human Resources and the Secretary a request to exceed the maximum of the applicable salary range. The request must be supported by documentation of comparable salaries in comparable operations within a comparable region of North Carolina and shall also include the specific amount of the salary adjustment the board proposes to pay the employee and the resulting salary. For the purpose of this subdivision, the Secretary shall determine what constitutes comparable operations within a comparable region of North Carolina.
(2)	The area board must obtain prior written approval for the proposed salary adjustment from both the Director of the Office of State Human Resources and the Secretary.
The requirements of subdivisions (1) and (2) of this subsection may not be waived by the area board, the Director of the Office of State Human Resources, or the Secretary regardless of whether the State Human Resources Commission has made a determination under G.S. 126‑11 that all or a portion of the board's personnel system has been determined to be substantially equivalent to, and therefore exempt from, the provisions of Chapter 126 of the General Statutes."
SECTION 13.  G.S. 126‑11 reads as rewritten:
"§ 126‑11.  Local personnel system may be established; approval and monitoring; rules and regulations.
(a)	The board of county commissioners of any county may establish and maintain a personnel system for all employees of the county subject to its jurisdiction, which system and any substantial changes to the system, shall be approved by the State Human Resources Commission as substantially equivalent to the standards established under this Chapter for employees of local departments of social services, local health departments, area mental health programs, and local emergency management programs. If approved by the State Human Resources Commission, the employees covered by the county system shall be exempt from all provisions of this Chapter except Article 6.
(a1)	With approval of each of the boards of commissioners of the county or counties which comprise the area mental health authority, the area mental health authority may establish and maintain a personnel system for all employees of the area mental health authority, which system and any substantial changes to the system, shall be equivalent to the standards established under this Chapter for employees of area mental health authorities. If approved by the State Human Resources Commission, the employees covered by the area mental health authority system shall be exempt from all provisions of this Chapter except Article 6.
(b)	A board of county commissioners may petition the State Human Resources Commission to determine whether any portion of its total personnel system meets the requirements of subsection (a) of this section. Upon such determination, county employees shall be exempt from the provisions of this Chapter relating to the approved portions of the county personnel system.
(b1)	The board of an area mental health authority, with the approval of each of the boards of commissioners of the county or counties which comprise the area mental health authority, may petition the State Human Resources Commission to determine whether any portion of its total personnel system meets the requirements of subsection (a1) of this section. Upon such determination, area mental health authority employees shall be exempt from the provisions of this Chapter relating to the approved portions of the area mental health authority personnel system except as provided in G.S. 122C‑121.
(b2)	Upon the merger or consolidation of two or more local management entities/managed care organizations, any determination made prior to the effective date of that merger or consolidation that all or a portion of any applicable area mental health authority personnel system is substantially equivalent is void. The board of the newly merged or consolidated area mental health authority, with the approval of each of the boards of commissioners of the county or counties which comprise the newly merged or consolidated area mental health authority, may petition the State Human Resources Commission to determine whether any portion of its total personnel system meets the requirements of subsection (a1) of this section. Upon such determination, area mental health authority employees shall be exempt from the provisions of this Chapter relating to the approved portions of the area mental health authority personnel system except as provided in G.S. 122C‑121 and G.S. 122C‑154.
(c)	The Office of State Human Resources shall monitor at least annually county or area mental health authority personnel systems approved under this section in order to ensure compliance.
(d)	In order to define "substantially equivalent," the State Human Resources Commission is authorized to promulgate rules and regulations to implement the federal merit system standards and these regulations at a minimum shall include: recruitment and selection of employees; position classification; pay administration; training; employee relations; equal employment opportunity; and records and reports."
SECTION 14.  Section 12F.2(a) of S.L. 2015‑241 reads as rewritten:
"SECTION 12F.2.(a)  For the purpose of mitigating cash flow problems that many LME/MCOs experience at the beginning of each fiscal year relative to single stream funding, the Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services (DMH/DD/SAS), shall distribute not less than one‑twelfth of each LME/MCO's base budget allocation at the beginning of the fiscal year and subtract the amount of that distribution from the LME/MCO's total reimbursements for the fiscal year. The Department of Health and Human Services, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services, shall distribute one‑twelfth of each LME/MCO's single stream allocation on or before the last working day of each month beginning with the first month of the fiscal year and continuing monthly thereafter."
SECTION 15.  G.S. 122C‑115.1 and Part 2A of Article 4 of Chapter 122C of the General Statutes are repealed.
SECTION 16.  The Revisor of Statutes shall delete every reference to G.S. 122C‑115.1, G.S. 122C‑127, and the phrases "county program" and "consolidated human services agency" wherever they occur in Chapter 122C of the General Statutes.
SECTION 17.  Section 14 of this act becomes effective July 1, 2017. The remainder of this act is effective when it becomes law.