CalOptima Slammed By U.S. Audit

Nguyen on grand jury report

Orange County Supervisor Janet Nguyen. (Photo by: Nick Gerda/Voice of OC)

Federal officials Friday ordered CalOptima, Orange County’s health plan for low-income and disabled residents, to immediately halt enrollment of elderly patients into its 16,000-member OneCare program, citing a “serious threat to the health and safety” of participants.

“The audit results indicate that CalOptima’s performance issues are widespread and systemic in nature,” said a letter to CalOptima CEO Michael Schrader listing the audit findings.

(Click here to read the federal government's letter.)

State officials said that because of the federal findings, they will launch a separate audit of Medi-Cal programs at the $1.5-billion health plan that overall serves about 500,000 Orange County residents, most of them children.

The audit by the Centers for Medicare & Medicaid Services comes as county Supervisor Janet Nguyen, who took control of CalOptima in 2011, ends her two-year term as the Board of Supervisors’ representative on the CalOptima board of directors.

It is unclear whether county supervisors will reappoint her as their representative to the panel.

Nguyen declined to be interviewed.

County supervisors, who created CalOptima in 1993, are legally responsible for making sure it is well-run, but almost no county tax money goes into the program. At the time Nguyen took over, CalOptima had a reputation for being one of the state’s best run medical plans.

Numerous federal audits of the OneCare program have been conducted since it was created in about 2005, but the November 2013 audit is the first time severe problems have been found.

Among other things, auditors cited “widespread and systemic” failures, including denial of prescriptions, even when the drugs were covered by the plan, refusing to pay for emergency services, failure to pay medical providers on a timely basis, numerous failures in allowing patients and doctors to appeal denials of coverage and other problems.

Also as a result of the audit, CalOptima at least temporarily will be denied permission to participate in a three-year pilot program formerly called Duals but now labeled MediConnect, scheduled to begin in April to coordinate care for seniors and persons with disabilities. Before participating, CalOptima will have to correct the problems found in the audit.

CalOptima officials did not respond to a request for comment Friday afternoon. But others in the county said CalOptima executives, including CEO Schrader, were trying to downplay the significance of the audit findings by labeling it the “first comprehensive” OneCare audit.

Saturday afternoon, CalOptima released a news release that described the federal analysis as the "first comprehensive" OneCare audit.

"While there is a significant amount of work ahead for CalOptima and our health network partners, rest assured that there is no higher priority than ensuring access and quality of care for our members," said Schrader.

Nguyen created a major upheaval at CalOptima beginning in 2011 when she led a three-member Board of Supervisors majority in restructuring the CalOptima board of directors to give control to the medical industry and county departments.

Her actions came just as CalOptima and other health plans nationally were preparing to implement the federal Affordable Care Act, which went into effect this month.

Roughly two dozen top and key CalOptima executives left in the wake of her takeover for jobs in private industry or at other health plans. With a new, inexperienced board of directors that deferred to Nguyen on almost all issues, CalOptima spent much of 2012 and 2013 with key vacancies or with political appointees, such as Michael Ruane, brought in with no health care experience.

The Audit

CalOptima’s OneCare program serves about 16,000 older county residents who receive medical care and prescription drugs through the federal Medicare health plan for the elderly as well as Medi-Cal, which covers low-income state residents.

Under the plan, those who enroll could select one of 2,800 doctors and CalOptima provided prescription, dental, vision and other services, including transportation to and from medical appointments. One goal is to cut overall medical costs by providing treatments before patients wound up in emergency rooms.

Those who currently are enrolled in the program will continue to receive medical benefits, but the audit letter told CalOptima not to bring in new members or advertise the OneCare program until it fixes its problems.

“The nature of CalOptima’s noncompliance provides sufficient basis for CMS to find the presence of a serious threat to enrollees’ health and safety, supporting the immediate suspension of CalOptima’s enrollment and marketing activities,” the audit letter stated.

Most CalOptima recipients are children, and they and other adults aren’t affected by the OneCare audit restrictions.

“CMS identified multiple, serious violations on almost all files reviewed in the course of the audit,” declared the letter to CalOptima reporting the findings. It asserted that “significant violations” in handling how a patient was covered, appeals and other issues pose “a serious threat to the health and safety of enrollees.”

In one other area, the audit noted CalOptima’s “failure to demonstrate that fraud, waste, and abuse training is provided upon hire and annually thereafter to Board members, senior management, and employees.”

Ironically, the CalOptima board had an ad hoc committee studying fraud issues at the time Nguyen took over. Repeated requests by Voice of OC for the status of the ad hoc committee and its fraud study have gone unanswered.

Asked Friday for comment on the federal audit, Toby Douglas, director of the state Department of Health Care Services, declared in a statement that the audit findings “were significant, and they raise considerable concern at DHCS:

Given these concerns, Cal MediConnect will not move forward in Orange County until CalOptima has successfully completed the immediate corrective actions prescribed by CMS. Also as a result of today's announcement, DHCS and the Department of Managed Health Care (DMHC) intend to conduct an audit of the Medi-Cal operations at CalOptima.

He said the goal is to work with local and federal offices “to ensure that members served by the plan receive the quality of care to which they are entitled."

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