Federal officials Thursday lifted year-long sanctions against CalOptima, the county’s health plan that covers roughly 700,000 low income and disabled children and adults.

CalOptima board members celebrated by giving CEO Michael Schrader and the agency’s staff a standing ovation.

Then, they approved a $53,000 a year pay raise for Schrader, bringing his salary to $390,000, still below prevailing industry levels, according to board Vice Chairman Lee Penrose.

“The standing ovation speaks for itself,” said Penrose.

Throughout, board members and executives repeatedly vowed that never again would CalOptima slide into a state where it could be sanctioned by the federal Centers for Medicare and Medicaid Services. CalOptima’s $3 billion annual budget comes from federal and state funds.

Lifting federal sanctions “signifies turning a corner,” said Board of Supervisors Chairman Todd Spitzer, a member of the CalOptima board. “I want to thank you all for hanging in there. We can’t ever have sanctions again.”

Read full Orange County Health Authority Notice of Sanction Release 2-5-15 here.

The federal sanctions were imposed in January, 2014, after a federal audit of CalOptima’s then 16,000-member OneCare program for mostly elderly, low income county residents was found to pose 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,” federal officials wrote last year in a letter to Schrader. They barred CalOptima from enrolling new patients in the program whose membership has since dropped to 13,000.

State auditors came in following the federal findings and determined problems extended beyond the OneCare program. CalOptima was barred from joining six other counties in forming a state program called Cal MediConnect, similar to OneCare, for residents eligible for both Medicare and Medi-Cal.

That program is scheduled to launch July 1. The federal sanctions were lifted just in time for CalOptima staff to quickly prepare for state officials to determine whether the health plan now is ready to join Cal Medi-Connect.

“This (lifting sanctions) really opens the door to the real work,” Schrader told the board. “We’re headed down the road toward Cal Medi-Connect.”

The Medi-Connect program is facing its own problems as is may lose state funding if too few people opt to join.

All of this comes as thousands of new adults are being added to the Medi-Cal roles statewide since the federal Affordable Care Act, known politically as Obama Care, went into effect last year.

For CalOptima, there were added problems because former Supervisor Janet Nguyen, now a GOP state Senator from Garden Grove, was appointed by the Board of Supervisors in 2011 to the CalOptima board. Nguyen completely remade the board with inexperienced members just as the Affordable Care Act was taking effect.

At the same time, competition was keen throughout the health industry for highly-qualified executives and most of the CalOptima top staff left for other jobs.

Among issues raised by federal auditors was insufficient anti-fraud controls. Before Nguyen took over, the board of directors had created an ad hoc committee to investigate fraud issues. After the new board was in place, the anti-fraud committee disappeared and no one would explain why.

Nguyen and her board allies also quietly sidetracked a comprehensive study of weaknesses at CalOptima, killing a chance to fix at least some potential problems as much as a year before federal auditors turned up problems that included compliance issues, the contractor that provides pharmacy services, appeals and grievances, as well as troubles with some health networks.

The federal letter to CalOptima lifting the sanctions said a full audit report will follow summarizing all of its latest findings. But overall, the repeat audit conducted in January didn’t find anything seriously wrong.

“We have to make sure we hold the bar high so that something like the sanctions doesn’t happen again,” Schrader told the board Thursday. Among other things, he said, as a result of the sanctions CalOptima will more strictly monitor health networks that contract with CalOptima to care for patients.

Lifting the sanctions enabled the CalOptima board Thursday to focus on what lies ahead.

Spitzer said he’d like CalOptima to explore establishing some type of ombudsman system, independent of at least most of the agency executives, to hear and help resolve complaints from patients who participate in the health plan.

Overall, the roles of board members could change as well. More board members, representing other interests, may be added by the Board of Supervisors or changes may be made to those in the 11 existing voting seats.

“I’m just not sure we’re talking to all of the people who are trying to make us successful,” Spitzer said, referring in general to CalOptima’s relationships to others in Orange County. “How do we now make it (CalOptima) the shining star that it should be?”

Echoed Board Chairman Mark Refowitz, director of the county Health Care Agency, “we can be world famous.”

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