0403 - Div. of Human Services General Administration Fund, 0407 - Central Office General Administrative Fund, 0525 - Consolidated Medical Services Fund

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The purpose of this bill is to create "The Prompt Pay Act of 2011." The bill requires invoices to state agencies be paid within sixty days and provides exceptions for three specific agencies whose invoices must be processed within fifteen days. The bill requires interest be paid on invoices not paid within the prescribed time period. The bill provides exceptions for contested invoices. The bill provides that no agency owes another agency interest on an unpaid invoice. The bill also defines the term "state agency."
    The estimated fiscal impact to the Department for the proposed legislation is $91,342. Please note that although §12-3-5A (e) requires the Department to process all legitimate uncontested invoices within fifteen days of receipt, this calculation is based on interest accruing on the sixty-first day after such invoice was received per §12-3-5A (b). The above estimate is based on SFY2011 invoices (excluding claims payments) that were paid more than 60 days from receipt.

Fiscal Note Detail

Effect of Proposal Fiscal Year
Fiscal Year
(Upon Full
1. Estmated Total Cost 0 91,342 91,342
Personal Services 0 0 0
Current Expenses 0 91,342 91,342
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0

Explanation of above estimates (including long-range effect):

    Interest Rate: 9.5% (per WV code §11-10-17 (a))
    Total of Invoices over 60 days for FY 2011: 5,649 invoices totaling $11,537,884.83
     0506 - 4,914 invoices totaling $7,395,418.44
     0511 - 735 invoices totaling $4,142,466.39
    Interest Projected assuming average 30 days late: $91,342


    If the proposed legislation is intended to include Medicaid payments for medical services claims this could potentially have fiscal impact to the department both in terms of expenditures and cash flows. The Medicaid claims processing system and internal processes are configured to meet the Federal Prompt Payment regulations governing Medicaid payments in 42 CFR 447.45. The requirements of this legislation would be more restrictive, and could require system changes which would result in additional administrative expense. The interpretation of the term "process" in reference to the fifteen day requirement would need to be further clarified; if this term is construed to mean paid within fifteen days, or otherwise accelerate the processing of Medicaid claims beyond current standards, it would also accelerate use of cash (State match and Federal draws) to meet that requirement and impact the department's cash flow. Similar concerns would surround the interpretation of the term "process" with respect to administrative accounts payable invoices. The department can enter the invoices into WVFIMS timely, however the department does not control the remaining components of the accounts payable processing and payment and would not ultimately be able to ensure compliance with the proposed legislation.

    Person submitting Fiscal Note: Michael J. Lewis, M.D., Ph.D.
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