As Orange County’s health coverage for the poor approaches one million members this year, a state audit has called its leaders out for hoarding $1.2 billion that could’ve gone to improving health services and benefits.
It also found improprieties in the hirings of CalOptima executives, including that of the agency’s current CEO, Michael Hunn, who board directors appointed without conducting a national candidate search, despite public remarks by board directors stating they would.
The findings come after a state lawmaker voiced concerns over pay spikes at the agency under former board chair and current OC Supervisor Andrew Do, who resigned from Caloptima after news that the audit was underway.
And critics continue asking how CalOptima could justify its leaders making more in salary than presidents and governors to the low-income families they serve.
“Here we have a man making almost $1 million dollars a year from a state organization that is supposed to provide medical services to those in need,” said Jeanine Robbins, an Anaheim resident, advocate for homeless people and frequent observer of CalOptima board meetings.
‘An ex priest no less.”
Requests for comment from Hunn went unreturned as of Sunday.
But at the most recent CalOptima Board of Directors meeting last Thursday, he and board directors publicly responded to the audit, casting its findings as a “snapshot” of the past – as old issues under prior leadership.
Meanwhile, Hunn said things are changing, that the agency has “accelerated” the spending of its surplus on crucial community programs since he became interim CEO in 2021, and permanent CEO the following year.
Yet CalOptima leaders have agreed to apply the state’s recommendations to cure the problems it found in its report – namely by creating a written employee hiring policy auditors found to be nonexistent.
Except the policy approved on Thursday carves out a major exception.
It doesn’t apply to the CEO, the very position on which state auditors flagged hiring problems.
“By twice failing to publicly recruit for a new CEO or consider multiple candidates, CalOptima’s board limited its ability to select the most qualified candidates, and it deprived other qualified candidates of the opportunity to apply for the position,” reads the May report by State Auditor Grant Parks.
The audit adds:
“CalOptima’s board opened itself to criticism about the objectivity, appropriateness, and transparency of its hiring process, regardless of whether the individuals CalOptima hired to be its CEO were well qualified for that position.”
Why Exclude the CEO in a Revised Hiring Policy?
At Thursday’s board meeting, the CEO exception in the new hiring policy prompted CalOptima Board Director Dr. José Mayorga, the executive director of UCI Health Family Health Centers, to ask:
“I’d like to kind of get a better understanding of the new policy, the recruitment selection hiring. In particular, I’d like to maybe have a little bit more explanation on why the CEO was excluded in that policy. I think it’d be very helpful for the public to understand why that was.”
CalOptima staff called on an outside attorney to answer Mayorga’s question.
James Novello, an attorney with health insurer law firm Kennaday Leavitt, told Mayorga that the Board of Directors – not staff – set the hiring and qualification guidelines of the CEO.
“That would be up to the board to decide whether they should create or discuss or put in place standards for the CEO,” said Novello, who suggested board directors create an ad hoc committee “to have a discussion and decide how they want to proceed on that matter.”
Ad hoc committees aren’t subject to the state’s Ralph M. Brown Act public meetings laws – meaning they can secretly meet and discuss policy proposals.
Still, Board Director and county Supervisor Vicente Sarmiento called it a good idea to have a more “robust discussion,” considering Hunn’s hiring was noted as a problem in the audit.
“I think it’s a good idea that an ad hoc or some committee of this board be convened to just consider that, because it sounds like it’s an open question,” he said.
“Especially since it was referenced as part of the audit, I think it’s another corrective action that we can take to make sure we cure anything and address any ways that future searches are done,” Sarmiento added.
Novello said he agreed.
“Completely support that and would actually recommend that, and we would be helpful in any way we could to move that forward,” he said.
Hunn wasn’t the only CEO hiring which the state auditor found issues with.
The report calls out the hiring of Hunn’s predecessor, a CalOptima board director, to the CEO position in 2020. That CEO, Richard Sanchez, isn’t named in the report and retired in 2021.
“When CalOptima’s board chose to hire one of its own members to be the CEO, it created the appearance that the board was acting in the best interest of the individual involved rather than the best interests of the individuals CalOptima serves,” the report reads.
Before becoming interim CEO of CalOptima in April 2020, Sanchez also headed up the OC Health Care Agency in the early days of the COVID-19 pandemic.
He was a CalOptima board member before that.
The auditor’s office has since referred Sanchez’s hiring to the state’s Fair Political Practices Commission, while CalOptima leaders – in their own April 7 response to the audit’s findings – acknowledged the problem with his April 2020 appointment in writing last month.
But the problems continued the following year, according to the report.
In 2021, CalOptima had hired Hunn as a consultant “to perform several services, including a review of CalOptima’s organizational structure and its hiring processes, and to provide recommendations for improvements,” the report reads.
When Sanchez retired, CalOptima directors appointed Hunn as his interim replacement in November of 2021. In March of 2022, they permanently appointed him to the position.
“According to the chair of CalOptima’s board, [Hunn] would serve while the board conducted a national search for a permanent CEO,” the report reads. “However, CalOptima did not conduct such a search through its human resources department.”
It adds:
“The HR chief said that the board did not consult with her or the human resources department about this decision either, and she does not know why the board elected to choose its new CEO without conducting a nationwide search after the board’s chair had stated in a press release that CalOptima intended to do so.”
That promise for a national search came from former board chairman Andrew Do, a county supervisor who resigned from the board after it was revealed that an audit was underway.
State Auditor Finds $1.2 Billion Laying Around
Auditors also found that the agency amassed a surplus that could have been used to improve health plan benefits for the county’s poorest and most vulnerable residents.
While the agency set aside what auditors deemed a “prudent” reserve amount of $570 million, there was still $675 million in surplus cash sitting around as of June 2022, according to the report.
The report says the agency failed to ensure people got “timely access” to care, citing a state health care services department survey conducted between 2021 and 2022.
“CalOptima’s primary care and specialty procedures did not meet CalOptima’s standard for timely access to routine or urgent appointments,” reads the report, which adds that another state survey showed “CalOptima performed below the national average for getting care quickly to both adult and child patients.”
At Thursday’s meeting, CalOptima leaders said they’ve upped their spending and turned the agency’s direction.
“As the report notes, CalOptima Health has drastically accelerated its allocation of surplus funds since my arrival as the CEO in November of 2021,” Hunn said.
Specifically:
“A total of $547.9 million (spent) since the fiscal year 21-22,” Hunn said, including five-year grants to community health centers, rate increases for contracted providers who treat kids with autism, as well as investments in the Garden Grove street medicine program treating homeless people for outdoor wounds and infections.
“I appreciate the audit, but it’s really a snapshot in time in the past,” said CalOptima Board Director Doug Chaffee, also a county supervisor, during the meeting. “And I think if the audit had been all the way today, they’d find that the things that are of concern no longer exist. We have a great staff here.”
Sarmiento said “those questions are valid to be asked of us, and I think for us to ask of ourselves, and make sure that those funds are used for what they are intended to, for the members, and to make sure that their quality and delivery of care is done well.”
He added:
“I think there’s a distinction between holding funds unnecessarily and spending them wisely.”
Correction: A previous version of this article incorrectly referred to Dr. José Mayorga as executive director of UCI Health. He is the executive director of UCI Family Health Centers. We regret the error.