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California State Auditor Report Number : 2014-134

California Department of Health Care Services
Improved Monitoring of Medi-Cal Managed Care Health Plans Is Necessary to Better Ensure Access to Care



Our audit of the California Department of Health Care Services’ (Health Care Services) oversight of the California Medical Assistance Program (Medi-Cal) managed care health plans (health plans) revealed the following:

Results in Brief

The California Department of Health Care Services (Health Care Services) is responsible for administering the California Medical Assistance Program (Medi‑Cal), which is California’s implementation of the federal Medicaid program. Medi‑Cal provides health care services to aged, disabled, and low‑income individuals through two different delivery systems: fee‑for‑service, which allows Medi‑Cal beneficiaries to receive medical services from any health care provider who participates in Medi‑Cal, and managed care, which requires each enrolled Medi‑Cal beneficiary to receive medical services through a single provider of the beneficiary’s choice within the appropriate Medi‑Cal managed care health plan’s (health plans) network of primary care physicians (provider network). According to Health Care Services’ website, as of March 2015, more than 12.2 million Californians were enrolled in Medi‑Cal, and 76 percent of these enrollees were in Medi‑Cal managed care. As of that same date, Health Care Services had contracts with 22 health plans to provide managed health care services to Medi‑Cal beneficiaries, whose counties of residence determined their health plan choices.1

Health Care Services should improve its processes for verifying the health plan data that it uses to determine the adequacy of each health plan’s provider network. Federal regulations require, among other things, that the State certify a health plan’s participation both upon entry into Medi‑Cal managed care and when it enrolls new populations in the Medi‑Cal managed care program, such as when the State moved the beneficiaries of the Healthy Families Program into Medi‑Cal.2 Before implementing the transition, the federal Centers for Medicare and Medicaid Services required Health Care Services, among other things, to identify the beneficiaries it anticipated would be able to keep their current primary care providers after transitioning to Medi‑Cal. Health Care Services obtained data from health plans, along with narrative responses, to certify that the plans met various network adequacy standards. However, Health Care Services did not verify that the provider network data it received from the health plans were accurate. Similarly, for one health plan that we reviewed, Health Care Services certified its participation in the Medi‑Cal managed care program when the State expanded managed care to 28 rural counties, but Health Care Services had not first reviewed the data that the health plan had used to demonstrate that it met the time‑and‑distance standard that Health Care Services requires. Health Care Services’ contracts with health plans require the plans to maintain a network of primary care providers with at least one provider located within either 30 minutes or 10 miles of a beneficiary’s residence unless the health plan has an alternative time‑and‑distance standard approved by Health Care Services.3 Without verifying the data it received from health plans, Health Care Services cannot ensure that the health plans had adequate provider networks to serve Medi‑Cal beneficiaries.

Health Care Services also cannot be certain the quarterly adequacy assessments of provider networks that the California Department of Managed Health Care (Managed Health Care) performs on its behalf are based on accurate data. State law requires Health Care Services to contract with Managed Health Care to assess the adequacy of the provider networks of Medi‑Cal health plans. Health Care Services receives data related to a health plan’s provider network from the health plan and sends it to Managed Health Care, which uses the data to perform quarterly assessments of network adequacy. However, Health Care Services performs no substantive reviews of these data before it forwards the data to Managed Health Care. The chief of Health Care Services’ Program Monitoring and Compliance Branch acknowledged that the lack of reviews has been an area identified for improvement and that Health Care Services plans to implement new processes by late 2015 to verify the accuracy and completeness of these data.

We reviewed the provider directories for three health plans in selected counties—Anthem Blue Cross in Fresno County, Health Net in Los Angeles County, and Partnership HealthPlan of California (Partnership HealthPlan) in Solano County—and found inaccuracies ranging from incorrect telephone numbers for providers to listings of providers who were no longer participating in the health plan. Using the results of our testing, we estimated that the three health plans’ provider directories contain inaccurate information related to at least one of the six areas we reviewed for 3 percent to 23 percent of providers. We found that those health plans that regularly reach out to providers to update their information, such as Partnership HealthPlan, which visits each of its providers eight to 10 times per year, had fewer errors in their provider directories than did Anthem Blue Cross, which only recently began actively reaching out to its providers to update the information in its provider directories. In contrast to Partnership HealthPlan’s provider directory, the directory for Anthem Blue Cross contained one or more inaccuracies in the provider information for 18 providers, or 23.4 percent of the 77 provider listings we reviewed. Anthem Blue Cross operates in twice as many counties as Partnership HealthPlan and has close to 2,400 providers, compared to Partnership HealthPlan’s almost 800 providers.

Although the health plans we reviewed could improve their processes for reviewing provider directories, Health Care Services must also improve its own process for reviewing these provider directories. Specifically, Health Care Services did not identify any inaccuracies in the three provider directories we examined. Health Care Services requires health plans to submit updated versions of their printed provider directories every six months for itsreview and approval. However, Health Care Services’ directory review tool, which guides its evaluation of the accuracy of the directories, is inadequate. For example, the review tool does not guide staff on how to select a sample size or how to choose the providers to contact. As a result, the methods that Health Care Services’ staff has used to determine the number of providers to review have been inconsistent. Additionally, staff has used inconsistent methods to determine which providers to contact so that staff can verify their listings in the provider directory. The acting chief of Health Care Services’ Managed Care Operations Division (acting chief) also stated that staff maintain documentation of inaccuracies they find during their reviews of the directories. Because staff did not find any errors, Health Care Services did not have any documentation to demonstrate that staff reviewed the three health plans’ directories, as it claimed. These flaws in its review process have resulted in Health Care Services’ approving provider directories with inaccurate information, which could cause Medi‑Cal beneficiaries to experience difficulties in obtaining timely access to care.

State regulation allows Health Care Services to create a Medi‑Cal Managed Care Office of the Ombudsman (ombudsman office) to investigate and resolve complaints by or on behalf of Medi‑Cal beneficiaries about health plans. However, according to the chief of the ombudsman office, the office’s telephone system cannot handle the volume of calls it receives from beneficiaries or their representatives requesting assistance, and the ombudsman office does not have adequate staff to answer all of the calls that the telephone system does accept. Ombudsman office data show that the telephone system rejected from about 7,000 to more than 45,000 calls per month between February 2014 and January 2015. Additionally, the chief of the ombudsman office stated that staffing limitations have allowed it to answer an average of just 30 percent to 50 percent of the calls that the telephone system has accepted. Each month between February 2014 and January 2015, an average of 12,500 additional calls went unanswered. Further, the chief of the Managed Care Internal Operations Branch told us that the ombudsman office lacks an adequate database system to maintain the information related to all calls. He stated that because of hardware limitations, the database crashes frequently, resulting in loss of data. The chief stated that Health Care Services is in the process of upgrading the database to ensure data integrity, and the acting chief stated that Health Care Services upgraded its server software in March 2015 as an interim measure, and the department plans to have a new system in place during fiscal year 2015–16.

Further, Health Care Services has not consistently monitored health plans to ensure that they meet Medi‑Cal beneficiaries’ medical needs. State law requires Health Care Services to perform annual medical audits of all Medi‑Cal health plans. However, the chief of Health Care Services’ Medical Review Branch (medical review chief) stated that Health Care Services did not perform any annual medical audits before 2012. He stated that he was advised of the requirement when he assumed the position as chief in May 2011. In fiscal year 2013–14 Health Care Services performed audits of just 10 of the 22 Medi‑Cal health plans. The medical review chief noted that staff are fully trained, and he is developing the schedule of audits for the next fiscal year. The goal is to comply fully with the statutory requirement in fiscal year 2015–16.

Health Care Services also has not always ensured that Managed Health Care, with which it entered into an agreement to perform quarterly assessments of provider networks for existing health plans, has performed the required assessments. Specifically, since the first quarter of 2014, Managed Health Care has not performed such assessments for health plans that have served the 28 counties that were part of the expansion of Medi‑Cal managed care to rural counties. These counties had Medi‑Cal enrollees of nearly 351,000 in March 2014 and had more than 515,000 enrollees in March 2015. In June 2013 the Legislature approved four limited‑term positions for July 2013 through December 2014, which Managed Health Care planned to use to perform quarterly reviews. Managed Health Care did not fill these positions because the agreement to perform the quarterly reviews was not approved until June 2014, leaving little time before the expiration of the limited‑term positions. Instead, Managed Health Care performed the reviews for the first quarter of 2014 with its existing staff, but it determined that it could not sustain that amount of additional work. Because Health Care Services has not ensured that Managed Health Care performed these evaluations, the State cannot be certain that the health plans are maintaining adequate provider networks to serve Medi‑Cal beneficiaries in the 28 counties. Managed Health Care told us that in May 2015 it received an increase in staffing, and it plans to resume the quarterly reviews.

Finally, Managed Health Care has an opportunity to fulfill more efficiently some of its responsibilities that overlap with the work performed by Health Care Services. Specifically, both departments are statutorily responsible for performing periodic reviews of many health plans to ensure adequate access to care for enrollees. State laws that mandate these reviews require the two departments to follow standards established under the Knox‑Keene Health Care Service Plan Act of 1975. Both departments assess eight areas as part of their respective reviews, and seven of these eight areas are the same or similar, resulting in some overlapping activities. Although these state laws allow both departments to rely on each other’s work to meet their responsibilities, neither department is currently relying on the work performed by the other.

Because Health Care Services must review the 22 Medi‑Cal health plans more frequently than does Managed Health Care, we believe that Managed Health Care should rely on Health Care Services’ reviews of the overlapping areas for 17 of the 22 Medi‑Cal health plans that it licenses. The deputy director of Managed Health Care’s Help Center stated that the two departments have been coordinating since 2013 to minimize duplication of work. However, this coordination is limited to sharing audit tools, coordinating logistics, and sharing audit findings and corrective actions. Further, the deputy director stated that Managed Health Care is analyzing methods to use work performed in Health Care Services’ audits to meet the legal requirements for its reviews of Medi‑Cal health plans going forward.


To ensure that Health Care Services analyzes accurately the adequacy of provider networks when initially certifying a health plan and when new beneficiary populations are added, it should establish by September 2015 a process to verify the accuracy of the provider network data the health plan uses to demonstrate that it meets network adequacy standards.

To make certain that Managed Health Care analyzes accurately the adequacy of provider networks through its ongoing quarterly assessments of provider networks, Health Care Services should establish by September 2015 a processto verify the provider network data that it receives from health plans and forwards to Managed Health Care for its review of network adequacy.

To improve the accuracy of provider directories, Health Care Services should review each health plan’s process for updating and verifying the accuracy of its directory, identify best practices, and require health plans to follow those practices.

To ensure that its review of provider directories effectively identifies inaccurate information before it approves the directories for publication, Health Care Services should establish by September 2015 more detailed policies and procedures for verifying the accuracy of provider directories. Specifically, it should develop procedures for its staff to select a sample size based on the number of providers in the directory under review, ensurethat the sample of providers is randomly selected, and retain all documents associated with the review for at least three years.

To ensure that it can adequately handle the volume of telephone calls from Medi‑Cal beneficiaries, Health Care Services should implement an effective plan to upgrade or replace the ombudsman office’s telephone system and database.

To make certain that it complies with state law requiring it to conduct annual medical audits of Medi‑Cal health plans, Health Care Services should finalize and adhere to the new schedule it develops for auditing all health plans.

To ensure that it complies with state law, Health Care Services should increase its oversight of its agreements with Managed Health Care to ensure that it completes the assessments required under the agreements. Further, Managed Health Care should continue its plan to resume the quarterly reviews of provider networks in 2015.

To increase the efficiency of statutorily required reviews by eliminating duplicative work, Managed Health Care should determine by September 2015 the extent to which it can rely on Health Care Services’ work to eliminate the overlap in their reviews of health plans.

Agency Comments

Managed Health Care agreed with our recommendations and indicated that it will take actions to implement them. Health Care Services generally agreed with our recommendations and outlined actions it will take to implement them. However, it disagreed with our recommendation that it increase oversight of Managed Health Care to ensure that it completes the quarterly assessments.


1 Health Care Services has also contracted with two additional health plans to provide specialized services, such as AIDS care, to fewer than 1,000 Medi‑Cal patients. Our audit did not include these two plans and instead focused on nonspecialized service health plans. Go back to text

2 The Healthy Families Program provided health, dental, and vision coverage to children without insurance who did not qualify for no‑cost Medi‑Cal. The transition into Medi‑Cal began in 2013. Go back to text

3 Our audit focused on primary care providers. Thus, throughout this report, the word providers refers to primary care providers. Go back to text

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