OC Grand Jury Issues Scathing Report on CalOptima

In the wake of a blistering report by Orange County's Grand Jury that raised troubling questions about hospital lobbyists writing controversial changes to the county's $1.5 billion health plan for the poor and then fundraising for Supervisor Janet Nguyen, a majority of her colleagues Friday said they supported changing the board governance for CalOptima.

After reading the report, State Senator Lou Correa also said he was researching legislation to change governance to hike transparency.

“The entire board should sit on CalOptima,” said County Supervisor Todd Spitzer after reviewing the report.

“This could be a game changer,” said Supervisors’ Chairman Shawn Nelson.

County supervisors have 90 days to respond formally to the report.

“Political turmoil threatens the organization, jeopardizing its membership’s access to quality healthcare and potentially putting the entire entity at risk,” concluded the grand jury report.

The 15-page report also says the Hospital Association of Southern California drafted the 2011 ordinance Nguyen used to remake the CalOptima board of directors and the report appears to implicate HASC in distribution of an anonymous letter used by Nguyen in an attempt to discredit former CalOptima board Chairman Ed Kacic.

(Read the report: "CalOptima Burns While Majority of Supervisors Fiddle")

In addition, the Grand Jury details how a confidential report to the CalOptima board was distorted to falsely make it appear there were serious problems within CalOptima’s management. The section of the report then was leaked to the Orange County Register.

The findings of the report, titled “CalOptima Burns While Majority of Supervisors Fiddle,” include the following:

  • A “CalOptima board member (Nguyen) and two CalOptima (staff) lawyers have been disruptive and created an atmosphere that according to current and former CalOptima employees is ‘unsafe for senior executives.’” Sixteen top executives, including the CEO, chief financial officer, chief medical officer and chief operating officer, have left CalOptima since Nguyen began remaking its board of directors.
  • "Member organizations have expressed fear of retaliation if they do not support certain (unnamed) causes or candidates and the Board of Supervisors majority has not attempted to curtail or dispel these fears.”
  • An unidentified CalOptima board member privately stopped staff from hiring an outside law firm to investigate allegations against four board members, even though the board had voted unanimously to hire the firm.
  • “Several current CalOptima Board members and recent hires lack the healthcare experience to understand the complexity of CalOptima as proven by their comments and questions during CalOptima Board meetings.
  • A majority of the five supervisors “failed to take an active role in preserving (CalOptima) an entity playing a vital role in the healthcare needs of the County’s young, disabled, low income and senior residents.” It also blamed a majority of the supervisors for allowing the top CalOptima executives to leave.
  • The decision by the current CalOptima board to seek a total of $90,321 from two former board chairmen, Ed Kacic and Michael Stephens, “had all the earmarks of retribution by the retooled Board of Directors against the Chairmen for fervently opposing the ordinance change.
  • "Supervisors should change the CalOptima board of directors to include more than one supervisor and remove the two county employes, the directors of the Health Care and Social Services Agencies. Employees have to report to the county’s CEO and are too likely to be intimidated by a supervisor, the report said. All five supervisors serve on the Orange County Transportation Authority board even though it handles less taxpayer money than CalOptima.

In a news release accompanying the report, the Grand Jury Foreman Raymond Garcia said the body will continue to “monitor” CalOptima through July 1, when a new grand jury is sworn in. More reports will be issued if needed, the news release said.

Given all the personnel issues at the agency, Spitzer said supervisors should sit on the board of directors to have a better sense of the how the agency is running because they can participate in closed session deliberations.

Correa also said he would be keeping an eye on the issue from Sacramento.

“You’re talking about more than 400,000 lives entrusted to CalOptima, Correa said. “This is an extension of state government at the local level.”

Supervisor John Moorlach credited the grand jury’s report saying, “I voted against just about everything,” referring to the series of ordinance changes to CalOptima’s governance in 2011.

Moorlach also reacted to the grand jury’s focus on the fact that the Hospital Association of Southern California wrote the ordinance changing CalOptima’s governance and then helped Nguyen fundraise.

“I don’t know if you would see something like that occurring in my approach to this office,” Moorlach said.

CalOptima, which began operating in 1995, serves about 427,000 county residents who are disabled, low-income or elderly. The total includes about one third of all children in Orange County. The total number of CalOptima “members” is expected to rise to 540,000 or 27 percent of the county’s population when the new federal health care law takes effect next year. All participants must be U.S. citizens or legal residents.

The grand jury report didn’t identify individuals by name, instead using descriptions like “the supervisor on the board” of CalOptima at a specified time.

Nguyen, declined an interview request, instead issuing a statement that said “this report is plagued by inaccuracies, misinformation, and the omission of facts and fails to focus on CalOptima’s past mismanagement and lack of oversight by the previous Board, which resulted in a lack of transparency and the misuse of over $30 million of taxpayer dollars.”

Both Kacic and James McAleer, a former CalOptima vice chairman who resigned last spring, criticizing Nguyen for micromanaging and trying to exert control over the board and staff, said they felt vindicated by the report.

"It’s not surprising that the supervisor (Nguyen) takes exception to everything in the report yet it is strikingly obvious that the issues at CalOptima began with her involvement," McAleer said. "I’m really pleased at what I perceive to be a very accurate and very thorough report.”

Said Kacic: “The grand jury obviously conducted thorough research over several months, and was very thoughtful in both reporting the facts and making recommendations.”

Julie Puentes, county lobbyist for the Hospital Association of Southern California, did not immediately return a phone call but Jim Lott, HASC’s Los Angeles representative, said in an email “for the record, please know that the policy of our company is to not comment on investigative reports and studies performed by government watchdog agencies.”

Michael Schrader, CalOptima’s new chief executive officer, said in a written statement “I appreciate the interest of the Grand Jury in the agency, and welcome public scrutiny and review of our operations. We look forward to the opportunity to respond to the report.”

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

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