CalOptima Board Approves Bonuses and Raises for Its Executives

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The CalOptima board of directors last week voted to award a one-time $26,775 performance-based bonus to CEO Michael Schrader, who after nearly two-dozen resignations of key staff has been trying to rebuild the $1.5-billion county health plan for low-income, elderly and disabled residents.

The CalOptima board also awarded a permanent 4-percent “merit” salary boost to the health plan’s general counsel, Gary Crockett, raising his annual base pay to $214,240, despite questions by the county grand jury and controversy this year over board members not recusing themselves when they may have had a conflict of interest.

Board members apparently weren’t instructed on state conflict of interest laws or advised when they should recuse themselves from voting, duties that in other agencies are performed by the lawyers.

The state’s Fair Political Practices Commission is investigating conflict of interest issues involving all 10 of the CalOptima board of directors as well as four of the five county supervisors. A special FBI task force also is investigating public corruption in Orange County, and according to individuals who said they have been interviewed, agents asked questions about, among others, Supervisor Janet Nguyen, the Board of Supervisors’ representative on the CalOptima board.

Nguyen, with support from two other supervisors, scrapped the previous CalOptima board of directors in favor of a new one dominated by representatives of the medical industry and county government. In the past she strongly opposed the type of performance-based one-time payment that Schrader received, but she didn’t attend The Oct. 3 meeting. Her office declined a request to interview her.

In addition to the two salary issues, CalOptima board Chairman Mark Refowitz, who also heads the county Health Care Agency, alerted board members on Oct. 3 about a pending federal audit of the Medicare portion of CalOptima’s operations. Known locally as OneCare, the program provides Medicare and Medi-Cal benefits to about 15,600 low-income, elderly residents.

The number enrolled in the program is a small portion of the nearly 469,000 total CalOptima “membership,” but health plans that perform exceptionally well compared with other plans and earn four or five stars receive higher federal payments, an incentive for lower-performing plans to do better. In addition, there is a prestige factor; high-rated plans stand out nationally.

The financial incentives are designed to force health plans to provide high-quality care and not waste tax money.

In the past, CalOptima has been one of the highest performing health plans in the state, but Refowitz predicted CalOptima may not get high ratings this year. He indicated lower marks would result from a higher level of scrutiny, not an actual drop-off in performance.

“We shouldn’t be shocked if they [auditors] come in here … and really start kicking the tires,” Refowitz warned. He said Dr. Samara Cardenas, a pediatrician and CalOptima board member, will represent the board in talks with the auditors.

The audit was supposed to start Monday but has been delayed by Congress’ federal worker shutdown.

Refowitz also said that CalOptima finally may be filling the only seat on its 11-member board reserved specifically for a person covered by the health plan. Five seats are held by the medical industry, three by county employees including Nguyen and two by individuals who have no connection or background in health care.

The seat for a plan participant was specifically created in January 2012 when Nguyen’s changes in the board went into effect, but it never has been filled.

Even when it is, more than 60 percent of the health plan “members” will have been blocked from applying because they are younger than 18 and their parents aren’t allowed to seek a position on the board.

“Please note that parents of minor children receiving services through CalOptima do not qualify per County Ordinance,” states the recruiting announcement on the county’s website.

Executive pay incentives became an issue during the summer of 2011 when the former CalOptima board concluded that then CEO Richard Chambers had met performance criteria spelled out in his contract and was legally entitled to a performance-based bonus. Along with a car allowance, his annual pay rose to $515,743, according to The Orange County Register.

Based on similar contract criteria, nine other executives under Chambers received performance payments ranging from $20,700 to $67,000.

CalOptima board members said the financial incentives were necessary because private industry and other health organizations paid their executives far more.

At the time, Nguyen strongly criticized the payments. But last year after the departure of so many key executives to private industry and jobs with other government organizations, the new board she had created approved a series of “retention bonuses” intended solely to prevent more executives from leaving.

Under that plan, executives received a bonus if they just agreed to stay through a certain date. Voice of OC, under the California Public Records Act, has requested a list of all retention bonuses that were paid out under the plan.

Schrader’s performance-based bonus of 8.5 percent means a onetime addition of $26,775 to his $315,000 annual salary.

In spite of calling Crockett’s permanent 4-percent raise a “merit increase,” CalOptima officials said that the phrase is a generic description for general pay raises and that the amount was in line with overall increases given to most of the staff.

Crockett has been at the core of a number of controversial CalOptima issues since 2011.

According to the 2012-2013 county grand jury report “CalOptima Burns While Majority of Supervisors Fiddle,” in early 2011, “a CalOptima lawyer made more than 100 allegations against CalOptima’s senior executives prompting the CalOptima Board of Directors to commission an outside legal firm to conduct an investigation.”

Ultimately, there were three reports presented to the board based on accusations made by Crockett. The reports, known as the Theodora Reports because they were done or commissioned through Nguyen campaign donor, Costa Mesa lawyer Todd Theodora, never have been made public. But copies reportedly have been obtained by federal and state investigators.

In its report, the grand jury stated that the Theodora reports determined “none of the CalOptima lawyer’s allegations were founded and that he retracted over 50 allegations prior to any executive interviews.”

Crockett declined last week to discuss his allegations and the Theodora reports. “It’s subject to attorney-client privilege,” he said. “That’s all I can say about it.”

When asked about the 4-percent raise for Crockett, Refowitz said, “Gary does a remarkable job managing our litigation” and outside law firms.

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

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