CalOptima Board Claims Former Leaders, Foundation Owe $90,000

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The CalOptima board of directors voted last week to seek the return of about $90,000 for “unauthorized use of resources” from two former board chairmen and two nonprofits — the Managed System of Care and the Irvine Health Foundation.

CalOptima officials refused to say when the resources were used, how they were used or why. Gary Crockett, the health plan’s lawyer, said he was “acting at the direction of the board” by not releasing specific information but said a letter containing more details will be sent this week to those involved.

The former chairmen are Ed Kacic, who resigned this summer, and Michael Stephens.

Current CalOptima board Chairman Mark Refowitz, who also heads the county’s Health Care Agency, declined to answer questions after the 6-0 vote by the board’s basic quorum.

But Supervisor Janet Nguyen, a member of the CalOptima board, told the following to The Orange County Register:

The money is being sought to compensate CalOptima for the use of “staff time or resources without the explicit authority of the board.”

CalOptima staff members were directed away from their regular work and told to assist Kacic and Stephens with projects on behalf of MSC, Nguyen said.

“It’s our fiduciary duty as board members to protect taxpayers’ money,” Nguyen said. “You should not be allowed to wastefully use taxpayers’ money for outside agency work.”

A summary of the investigation will be included in letters that CalOptima staff will send [this week] to Kacic and Stevens, Nguyen said.

Yet, former CalOptima Chief Executive Officer Richard Chambers said in a telephone interview he authorized the work. He said that he had the authority to do it and that the work was for the potential benefit of low-income and uninsured residents.

Chambers, who left CalOptima in April to become president of Molina Healthcare California, said he authorized staff assistance to apply for a federal grant of about $10 million that included funds for a 24-hour nurse advice telephone line and expanded county urgent care services. Both projects would have cut hospital emergency room costs, he said.

The county didn’t get the grant, which would have been part of a $10-billion federal effort to encourage new national health programs in advance of the new national health plan.

The Managed System of Care “is a community effort” that benefited CalOptima, Chambers said. “It was within the scope of the CEO’s authority and responsibilities, and I exercised it,” he said.

The Managed System of Care, formed in 2009, included top executives of CalOptima and the county Health Care Agency as well as CEOs of county hospitals — the “decision-makers,” according to Chambers. Clinics, doctors and other healthcare providers also joined.

Chambers said Orange County should expect about 140,000 more people to enroll in the county’s $1.4-billion health plan when the new national health plan takes effect in 2014. The goal of applying for the grant was to help prepare for the addition to the current 430,000 low-income, disabled and elderly members.

Ann Marie Mortimer, managing partner of the Los Angeles law firm Hunton & Williams, which represents the Irvine Health Foundation, said Sept. 7 that she hadn’t received any information yet from CalOptima.

“We’re surprised by their decision to move forward because we have been cooperative in providing facts that clearly demonstrate there was no inappropriate conduct or diversion of resources,” Mortimer said. “If CalOptima insists on pursuing the matter, we will vigorously defend any claims based on the facts.”

The issue began last winter with an anonymous letter that accused Kacic, who is president of the Irvine Health Foundation, of a conflict of interest and using “his position as chair and member of the CalOptima board to steer millions of dollars the agency funds to his foundation.”

After a six-month investigation, the CalOptima announcement said it was seeking $8,000 in reimbursements from Kacic, the Irvine Health Foundation, and from the Managed System of Care.

Kacic, who resigned from the CalOptima board in July, criticizing the way the anonymous letter and investigation have been dragged out, said Sept. 7 that no one from CalOptima has ever talked to him about the investigation.

Stephens, who could not immediately be reached for comment, is a former CalOptima board chairman and a consultant to the Managed System of Care.

A third CalOptima board member, former county Health Care Director David Riley, also served on the Managed System of Care steering committee but was not named as part of the action. Refowitz replaced Riley on the Managed System of Care in addition to serving as CalOptima board chair. The Managed System of Care has been inactive for the past few months after it failed to win the federal grant.

But the CalOptima board action also comes on top of efforts by Nguyen and two others on the Board of Supervisors to remake the CalOptima board of directors so that it gives providers a stronger voice.

In a July letter to the CalOptima board, Mortimer warned that the Irvine Health Foundation “will not be made the victim of the political aspirations of certain CalOptima board members, and IHF is fully prepared to take action as appropriate to stop once and for all these scurrilous, demonstrably false and damaging allegations.”

— TRACY WOOD

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