Contracting and performance standards.

(1) The Department of Children and Families shall adopt, by rule, provisions for including in its contracts incremental penalties to be imposed by its contract managers on a service provider due to the provider’s failure to comply with a requirement for corrective action. Any financial penalty that is imposed upon a provider may not be paid from funds being used to provide services to clients, and the provider may not reduce the amount of services being delivered to clients as a method for offsetting the impact of the penalty. If a financial penalty is imposed upon a provider that is a corporation, the department shall notify, at a minimum, the board of directors of the corporation. The department may notify, at its discretion, any additional parties that the department believes may be helpful in obtaining the corrective action that is being sought. Further, the rules adopted by the department must include provisions that permit the department to deduct the financial penalties from funds that would otherwise be due to the provider, not to exceed 10 percent of the amount that otherwise would be due to the provider for the period of noncompliance. If the department imposes a financial penalty, it shall advise the provider in writing of the cause for the penalty. A failure to include such deductions in a request for payment constitutes a ground for the department to reject that request for payment. The remedies identified in this subsection do not limit or restrict the department’s application of any other remedy available to it in the contract or under law. The remedies described in this subsection may be cumulative and may be assessed upon each separate failure to comply with instructions from the department to complete corrective action.

(2) The Agency for Persons with Disabilities must implement systems and controls to ensure financial integrity and service provision quality in the developmental services Medicaid waiver service system.

(3) The department shall include in its standard contract document a requirement that any state funds provided for the purchase of or improvements to real property are contingent upon the contractor or political subdivision granting to the state a security interest in the property at least to the amount of the state funds provided for at least 5 years from the date of purchase or the completion of the improvements or as further required by law. The contract must include a provision that, as a condition of receipt of state funding for this purpose, the provider agrees that, if it disposes of the property before the department’s interest is vacated, the provider will refund the proportionate share of the state’s initial investment, as adjusted by depreciation.

(4) Nothing contained in chapter 287 shall require competitive bids for health services involving examination, diagnosis, or treatment.