CalOptima, the county’s health care plan for low-income and elderly residents, now will administer its own mental health care services, after the agency voted to phase out its $41 million-a-year contract with Magellan Health.

The agency’s Board of Directors voted Sept. 7 to take administration of mental health services for a majority of the health plan’s members in-house, including responsibilities like contracting with mental health providers, processing reimbursement claims and overseeing therapy programs for patients with autism. Patients still will see outside specialists for treatment.

This will be the third time in three years the agency has made a major change in the management of its mental health services, and the change comes just one year after the agency approved its original contract with Magellan.

Rob Haupt, vice president of Autism Spectrum Therapies, which provides treatment to CalOptima patients, told the board the frequent transitions have created uncertainty and confusion.

“Will I have the same therapist come to my house?…What will my benefits be?” Haupt said. “These are questions our families have often asked us.”

CalOptima is the federal and state financed health plan for about 800,000 county residents, roughly a quarter of the population.

County Supervisor Andrew Do, who was part of an ad hoc committee that studied the agency’s contract with Magellan, said the committee’s focus was to find a solution that minimized disruption for patients.

“The ad hoc supports staff’s recommendation to bring the administration of behavioral health benefits in-house,” Do said to the board.

The change was prompted in part by a contract dispute between CalOptima and Magellan in July, which may have left some patients without mental health care for nine days when the company refused to process Medi-Cal payment claims.

The issue began when Magellan asked CalOptima to change the rate at which the company is reimbursed for applied behavioral analysis (ABA) services, a therapy for patients with a range of symptoms associated with autism, according to a staff report.

When the two parties could not reach an agreement, Magellan suddenly rescinded its contract with CalOptima. The state Department of Managed Health Care ultimately stepped in to require Magellan continue to provide services through the end of August.

Following the dispute, the CalOptima board voted last month to continue its contract with Magellan through the end of the year. Once that contract ends, CalOptima will begin administering mental health services on its own.

The transition will be a major undertaking for the $3.4 billion health agency.

On average, Magellan administers the mental health care services of 6,700 patients a month, according to a staff report. The company currently manages more than 530 contracts on behalf of CalOptima, which includes 800 different mental health providers and 300 autism therapy providers.

CalOptima staff estimated bringing mental health administration in-house will cost an additional $4.1 million annually and another $2.5 million in one-time costs.

Staff argued integrating mental health services into the agency’s operations will minimize future disruptions.

Although CalOptima staff provided no number for how many total new positions will need to be filled by January 1, the agency has already begun soliciting applications. So far it has received 175 applications and found 60 of those candidates to be qualified, according to staff.

Dr. Richard Helmer, Chief Medical Officer for CalOptima, said the agency already has experience in some areas, like customer service, contracting and responding to claims.

“We’re going to have to add people…but it’s not like any of these department functions (are new),” Helmer told the board at the Sept. 7 meeting.

The agency will need to hire at least 19 clinical staff for largely new roles that the agency has never had before.

Chief Operating Officer Ladan Khamseh said she is confident they will be able to fill those clinical positions.

“We have already done a lot of the interviews for those (positions),” Khamseh said at the board meeting.

Haupt and three other providers of autism therapies asked the board to consider extending the phase-out time for Magellan’s contract, which is four months.

Haupt said his company is facing a similar transition in mental health administrators in the state of Louisiana, where the transition period is one year.

“We would like to have more time, but we don’t have an agreement for provisions after that time,” said Helmer in his presentation to the board.

Asked why the contract cannot be extended, and several other questions, both Khamseh and CEO Michael Schrader declined to answer questions, instead requiring a reporter to email questions to the agency’s spokeswoman.

CalOptima spokeswoman Bridget Kelly eventually replied via email that “there is no extension opportunity. The Magellan contract will end on December 31, 2017.” She also did not explain why it could not be extended or provide any information beyond what was in the board’s agenda staff reports.

Asked whether there is an agency policy for executive staff not to answer news media questions, Schrader reiterated that all questions should be routed through the spokeswoman.

Correction: A previous version of this story misspelled the last name of CalOptima CEO Michael Schrader. Voice of OC regrets the error.

Contact Thy Vo at or follow her on Twitter @thyanhvo.  

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