Federal officials have given CalOptima, the county’s $1.7 billion health plan for low income and disabled residents, an extension into next year to fix serious problems providing health services to a program for elderly Orange County residents, including stepped up efforts to detect fraud.

CalOptima CEO Michael Schrader, in a report to the board of directors on Thursday’s agenda, said the federal Centers for Medicare & Medicaid Services or CMS okayed a CalOptima request for at least a six month extension before there is a new audit. Originally, federal auditors were due back this month.

“In its response, CMS recognized that CalOptima has demonstrated improvement since January and has made progress in correcting deficiencies while protecting current members,” according to Schrader’s report.

Among the changes are efforts to hire an in-house expert fraud investigator, according to a staff report to the CalOptima board of directors.  

Without providing details, the staff report said three cases of possible fraud were referred to the District Attorney’s office in 2013 and one case was sent to the federal Justice Department. Two cases currently are pending with the DA’s office and two with Justice, according to the update.

Health care fraud is a major nationwide problem, costing taxpayers more than $60 billion a year, according to federal law enforcement officials. It is the subject of several major national investigations and high-profile cases.

CalOptima had an ad hoc committee of its board members in 2011 focused on preventing fraud, but the committee apparently disappeared in mid-2012 after Supervisor Janet Nguyen took control of the board of directors and Health Care Agency director Mark Refowitz became chairman. Repeated requests by Voice of OC to learn the status of the anti-fraud ad hoc never were answered.

In addition to the critical January federal audit, state examiners in April reported separate “serious and significant” problems at CalOptima, including potentially dangerous delays in approving prescriptions.

State auditors are scheduled to return later this month to review progress fixing those issues.

CalOptima is the county’s largest agency, with an 11-member board of directors that includes two county supervisors: Nguyen, who is a Republican state Senate candidate, and Todd Spitzer.

The agency serves more than 600,000 residents, most of them children, and almost all of its $1.7 billion comes from federal and state tax funds.

Nguyen has downplayed the federal audit saying it affects only 16,000 elderly participants in a program that likely will be replaced in a year or two by a new program.

County supervisors added Spitzer to the CalOptima board in April to blunt Nguyen’s influence on the board following the federal audit.

The January federal audit found, among other things, “widespread and systemic” failures in CalOptima’s OneCare program for mostly elderly residents.

The failings included 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.

The federal officials ordered CalOptima to immediately halt enrollment of elderly patients the 16,000-member OneCare program, citing a “serious threat to the health and safety” of participants.

Also as a result of the audit, CalOptima was denied permission to participate in a three-year pilot program formerly called Duals but now labeled MediConnect. That plan, which began for other participants in April, coordinates care for seniors and persons with disabilities.

In his current report to the CalOptima board, Schrader said he hoped CalOptima would be able to participate in MediConnect by mid-2015.

Before participating, CalOptima will have to correct the problems found in the federal audit.

Dr. Amy Cullen, a Costa Mesa physician who became eligible for CalOptima, the county’s Medicaid and Medi-Cal program, when her lupus symptoms became too severe for her to work, said the federal audit of the OneCare program for seniors mirrored her experience with other CalOptima services.

“I thought that it [the federal audit] was very interesting, because the things they were cited for are the exact same problems that I experienced,” Cullen, a board-certified family medicine specialist, told Voice of OC in March.

“They denied coverage for things they should have covered. They would randomly increase my share of costs from zero to $1,200 a month. I’ve got stacks of letters from them denying things they should have covered,” she said.

CalOptima investigated the complaints she outlined to VOC and reversed itself and instead approved her hospitalization last year at UC Irvine Medical Center.

According to Schrader’s report this week, because programs are improving at CalOptima, federal authorities “offered an open-ended extension (before a new audit), meaning that a reaudit date will be set when CalOptima subits an attestation indicating that all sanction-related issues have been corrected and are not likely to reoccur.”

He said CalOptima is aiming for January, 2015 for the new federal audit.

And, he warned, to fix the problems “we may have to have difficult discussions about the readiness of all of our existing OneCare health networks to be fully compliant in that time frame, while balancing that a further delay of the reaudit could impact the Cal MediConnect launch.”

He added a further warning to vendors, “ultimately, our focus is on taking the time necessary to strengthen CalOptima’s delivery system with improved processes that hold our provider partners accountable and ensure a better experience for members.”

Schrader said CalOptima leaders have held meetings with OneCare providers.

While some don’t need to do much to meet performance requirements, others do.

“We also specifically reminded the (OneCare) executives of the sanctions and penalties that could result from continued underperformance, up to and including contract termination,” he wrote in his report to the board.

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

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