Conference report makes the following changes to the 3rd edition.

Changes the long title to AN ACT TO MODIFY CERTAIN REQUIREMENTS PERTAINING TO LOCAL MANAGEMENT ENTITIES/MANAGED CARE ORGANIZATIONS.

Amends Section 1 of the act, which sets out the encounter data submission requirements for local management entities/managed care organizations (LME/MCOs), by deleting the proposed third requirement that required DHHS to share encounter data with the Government Data Analytics Center. Changes the date by which DHHS is required to report to the Joint Legislative Oversight Committee on Health and Human Services regarding the status of the section to on or before February 1, 2017 (previously, February 1, 2016). 

Deletes the proposed additions to GS 122C-115.3, governing the Secretary of DHHS's approval of a county's withdrawal from an area authority on mental health, developmental disabilities, and substance abuse services operating under a 1915(b)/(c) Medicaid Waiver. The proposed language required the Secretary to adopt rules creating a process for withdrawal, as required by GS 122C-112.1(38) and SL 2012-151, and prohibited the Secretary from approving a county's withdrawal until these rules are established. 

Enacts GS 122C-124.3, Authorization to direct mergers and acquisitions, to authorize the Secretary of DHHS to direct the merger of LME/MCOs and to direct the acquisition of an LME/MCO by another LME/MCO. Authorizes the Secretary of DHHS (Secretary) to set time lines and dates for the orderly completion of the mergers and acquisitions. Sets out 11 factors  related to each LME/MCO the Secretary must consider in directing mergers and acquisitions. Provides that the failure of an LME/MCO to comply with the Secretary's directions under the statute constitutes noncompliance for purposes of GS 122C-124.2(c) and constitutes cause for the Secretary to terminate all contracts between the DHHS and the LME/MCO. Expires June 30, 2018.

Enacts GS 122C-147.3, LME/MCO use of funds, to authorize LME/MCOs to use funds only for purposes related to their functions and responsibilities under GS Chapter 122C, specifically including operation of the combined Medicaid Waiver program authorized under section 1915(b) and 1015(c) of the Social Security Act, or to carry out functions and responsibilities required by State law, federal law, or contract with DHHS. Establishes that a violation of the statute constitutes noncompliance for purposes of GS 122C-124.2(c). 

Makes conforming changes to GS 122C-124.4(c), concerning the consequences of noncompliance by an LME/MCO, to include new GS 122C-124.3 and GS 122C-147.3 in the specified statutory requirements that constitute noncompliance and trigger the specified actions to be taken by the Secretary.

Amends GS 122C-118.1, concerning the structure of boards of the area authorities, to allow the boards of county commissioners within certain large multicounty areas to appoint members of the area board through a process other than as required by this section if at least three-quarters of the counties (was, two thirds of the counties) adopt a resolution to that effect. Adds that no area board can be exempt from the membership composition requirements of subsection (b) of the statute (previously, allowed the Secretary to approve an appointment process that includes the constituent counties delegating appointment authority to intermediary bodies created by counties to represent regions of a multicounty area authority). Makes technical changes. Deletes the proposed revisions to subdivision (13) of subsection (b), which adjusted the board membership requirement for hospital administrators who serve as nonvoting members and participate only in board activities that are open to the public. Adds a new subsection (d1) to require each LME/MCO, beginning on July 1, 2017, to annually notify the Secretary of (1) the membership of the area board, (2) the county residence of each member, (3) how the membership composition requirements in subsection (b) of the statute are being met, (4) the term of office of each member, and (5) the LME/MCO's compliance with training requirements for its board members.

Directs all area boards to comply with the requirements of GS 122C-118.1(a1), as enacted by the act, no later than February 1, 2017.

Amends GS 122C-121, which sets out provisions relating to an area director, to establish that in no instance can the salary of an area director that is higher than the maximum applicable salary range exceed more than 40% the average salary of the area directors of the remaining LME/MCOs, as determined by the Secretary. Adds that if any director's salary that is higher than the maximum of the applicable salary range and exceeds by more than 40% the average salary of the area directors of the remaining LME/MCOs, the director's salary must be reduced to achieve compliance with subsection (a1) within 60 days after a determination by the Secretary. Adds new subsection (a3) to make the total compensation provided or recommended by each area board to its area director subject to review and approval by DHHS and the Office of State Human Resources (OSHR), at least annually. Prohibits an area board from increasing compensation to an area director prior to approval by the Secretary of DHHS and the Director of OSHR. Amends proposed subsection (e) to allow the Secretary to waive the requirements of subsection (e) (requiring the appointment of an area director to be based on the recommendation of at least two candidates by a search committee) when appointment of the area director results from the merger or consolidation of LME/MCOs. Amends proposed subsection (f) to clarify that, except as a result of the merger or consolidations of LME/MCOs, the area director cannot be terminated as specified without 30 days' prior written notice to the Secretary of DHHS.

Deletes the three proposed uncodified sections, which (1) maintained and extended the pilot program of the Department's Division of Health Service Regulation to study the use of electronic supervision devices as an alternative means of supervision during sleep hours at facilities for children and adolescents who have a primary diagnosis of mental illness or emotional disturbance, (2) required the Department's Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to distribute one-twelfth of each LME/MCO's allocation each month by the last working day of the month, and (3) required the Department to develop a plan for extending Community Guide services to individuals on the Medicaid Innovations Waiver waiting list and to report to the Joint Legislative Oversight Committee on Health and Human Services on the plan by March 15, 2016.  

Amends SL 2015-241, Section 12F.2(a), to require DHHS, Division of Mental Health, Developmental Disabilities, and Substance Abuse Services (DMH/DD/SAS), to distribute not less than one-twelfth of each LME/MCO's base budget allocation (previously, continuation allocation) at the beginning of the fiscal year, less the amount of that distribution from the LME/MCO's total reimbursements for the fiscal year. Additionally requires DHHS, DMH/DD/SAS. to 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. Effective July 1, 2016.