Public Audit of CalOptima Approved, but Not Without Controversy

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The CalOptima Board of Directors, in a contentious session that wound up moving behind closed doors, voted last week to hire an outside consultant to thoroughly review and publicly report on management of the $1.3-billion health care plan.

The decision was initially opposed by Janet Nguyen, a CalOptima board member and Orange County supervisor¬† who accused CalOptima CEO Richard Chambers of attempting an end run around the health care program’s board.

Other board members said Nguyen was misinterpreting Chambers’ proposal.

At issue was a plan by Chambers to hire Deloitte & Touche, one of the world’s largest accounting firms, to conduct a comprehensive audit of the county health care provider.

Chambers told the board that a thorough evaluation by a top firm was needed because of news accounts published late last year about a confidential preliminary report to the board that raised concerns about potential billing, executive pay and other issues. That report urged a full assessment of CalOptima.

Chambers said news reports made it important to quickly “allay any stakeholder concerns” about the organization, which serves more than 420,000 low-income Orange County families, elderly and disabled patients.

He noted CalOptima has received exceptionally good financial audits for several years. Others referred to the organization’s strong national reputation and low administrative costs.

Woodland Hills consultant Arthur S. Shorr made the preliminary report. Because it was not made public, CalOptima’s staff was unaware of the initial assessment until an Orange County Register published an article about it.

Nguyen has been highly critical in recent months of CalOptima’s management. She has not offered many specifics but has pointed out that CalOptima executives received bonuses at the same time the state was cutting payments for Medi-Cal programs.

Late last year, Nguyen persuded a divided Board of Supervisors to change the composition of the CalOptima board to give more control to health care providers and government.

Nguyen noted that the CalOptima board had decided in closed session to continue using a Costa Mesa law office, headed by Todd Theodora, and to create a special, three-member board committee to find a company to conduct the audit.

“Staff, to me, is stepping into our authority,” she said of Chambers’ request that the board hire Deloitte. “I’m shocked.”

Theodora, who assisted in the hiring of Schorr, is among Nguyen’s campaign donors. He and his wife Tracy Theodora donated a total of $3,600 to Nguyen after he was hired by the CalOptima board, according to Nguyen’s campaign reports.

According to the Register story “the [Schorr] report was ordered for Cal-Optima through attorney Theodora so it would be considered confidential under attorney-client privilege.”

A key section of Chambers’ plan for the proposed Deloitte & Touche audit is that findings, other than issues required by law to be confidential, would be made public at monthly board updates.

But Nguyen said she, county Health Care Agency head David Riley and CalOptima board chair Edward Kacic were supposed to use Theodora to recommend in closed session to the board who would do a full analysis.

“I don’t know Deloitte,” Nguyen said. “Staff is now overstepping their boundaries.”

Riley, who was attending his final board meeting before retiring from county government, backed Nguyen.

But other board members disagreed.

“I think [staff working with the board is] absolutely the right thing to do,” said Dr. Margarita Pereyda, chief medical officer at Costa Mesa’s Share Our Selves free clinic.

“I surely do not hear that [Chambers is] superceding our authority,” she said. “That’s not at all what I saw. I think it’s an unfair representation of what he did.”

Board Vice Chairman Jim McAleer, president and CEO of the Alzheimer’s Association Orange County Chapter, and the CalOptima board’s newest member, Lee Penrose, president and CEO of St. Jude Medical Center, also said that Chambers had a responsibility to CalOptima to act as soon as the news reports came out. They added, however, that the board should set the scope of the evaluation.

As a CEO, McAleer said, “I would not just sit there. I understand the need to take action. I really get that.”

After Nguyen again said Chambers’ plan would “let staff take over the internal audit,” McAleer said “you’re not hearing me say ‘let’s turn over the audit to the staff.’ ” Then, wagging his index finger at Nguyen and smiling, he said, “You’re very good at that.”

Board member Mary Ann Foo, executive director of the Orange County Asian and Pacific Islander Community Alliance, added her support for Chambers, saying “I never heard you once say you were going to take over this audit.”

“I’m willing to completely stay out,” Chambers told the board.

After a more than half-hour closed session, the Board returned to a public session, and McAleer proposed creating a new special board committee to select an independent firm to do the comprehensive evaluation of CalOptima and “make it fully public.”

His suggestion was approved unanimously. The three-member committee of Kacic, Nguyen and Penrose is to make its recommendation to the board next month.

Board members also said it was important to have the staff participate in the review.

“My intent is that the process be public and the staff participate in the process,” McAleer said after the meeting. “At the end of the day, if you try to do it with just one side or the other, you wind up with a crappy product.”

He said the evaluation is “important to make sure we’re doing everything by best practices of the industry.”

He added: “There is not a $1.4-billion organization in the world that doesn’t have deficiencies.”

Please contact Tracy Wood directly at twood@voiceofoc.org and follow her on Twitter: twitter.com/tracyVOC.

 

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