Responses to the Audit

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California Department of Health Care Services

California State Auditor’s Comment on the Response From the California Department of Health Care Services

California Department of Managed Health Care

Response From the California Department of Health Care Services

May 27, 2015

MS. ELAINE M. HOWLE, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Dear Ms. Howle:

The California Department of Health Care Services (DHCS) hereby provides response to the draft findings of the California State Auditor’s (CSA) report entitled, California Department of Health Care Services Improved Monitoring of Medi-Cal Managed Care Health Plans Is Necessary to Better Ensure Access to Care.

Although the CSA conducted this audit and issued several findings, DHCS only partially agrees with them. Prior to the commencement of the audit, DHCS had already begun developing and enhancing various network monitoring and certification processes. Significant work had occurred to identify areas of concern and next steps were determined.

In November of 2014, DHCS completed a reorganization of the Medi-Cal Managed Care Division into two new Divisions: 1) the Managed Care Operations, and 2) the Managed Care Quality and Monitoring. The purpose of the reorganization was to align operations and oversight of the Medi-Cal managed care program within DHCS with the rapidly increasing managed care enrollment – both as a percent of the whole and numerically. This split has allowed the two Divisions to specialize respectively in operations and quality and monitoring – in particular in the areas of network certifications, monitoring, and adequacy. A Network Adequacy and Monitoring Units were established within DHCS to specifically focus on and call out these efforts.

Currently, DHCS has a process for approving provider directories and certifying and monitoring health plan networks. The CSA audit focused on some portions of the network certification and monitoring processes. However, DHCS performs a substantial number of additional network monitoring efforts that were not reviewed as a part of this audit. These monitoring efforts include, but are not limited to, ongoing transition monitoring, grievances and appeals, State Fair Hearings, Independent Medical Reviews, call center/Ombudsman reports, secret shopping, network validation through data usage, timely access verification, and continuity of care data. Various monitoring elements are published in the quarterly Medi-Cal Managed Care Performance Dashboard.

DHCS agrees that certain monitoring processes need to be enhanced and began taking steps to accomplish this well before the audit occurred. DHCS began a Network Adequacy Monitoring Project in 2014 and has made significant progress with implementing new monitoring enhancements. Additionally, DHCS is in the process of certifying all health plan networks for the Behavioral Health Treatment benefit expansion into managed care and has created a formal network assessment tool to assist with this process and assure verification of networks occurs. This tool will be used ongoing.

For the past three years, DHCS and DMHC have worked together to coordinate medical audits and surveys. This coordination includes conducting bi-weekly audit conference calls, the creation of a coordinated audit schedule, a side-by-side analysis of audit and survey tools, and coordinated heath plan corrective action plans, when applicable. Additionally, the audit teams are onsite concurrently, conduct joint interviews, and sampling of procedures and data. DHCS also follows up on network findings concurrently together through joint communications to health plans.

DHCS appreciates the work performed by CSA and the opportunity to respond to the findings. If you have any questions, please contact Ms. Jacqueline Shepherd, Audit Coordinator, at (916) 650-0298.

Sincerely,

Jennifer Kent
Director

cc: Ms. Karen Johnson
Chief Deputy Director
Policy and Program Suppor
t 1501 Capitol Avenue, MS 0000
P.O. Box 997413
Sacramento, CA 95899-7413

Ms. Mari Cantwell
Chief Deputy Director
Health Care Programs
1501 Capitol Avenue, MS 0000
P.O. Box 997413
Sacramento, CA 95899-7413

Mr. Bruce Lim
Deputy Director
Audits & Investigation
s 1500 Capitol Avenue, MS 2000
P.O. Box 997413
Sacramento, CA 95899-7413

Ms. Claudia Crist
Deputy Director
Health Care Delivery System 1501
Capitol Avenue, MS 4050
P.O. Box 997413
Sacramento, CA 95899-7413
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Department of Health Care Services Response to California State Auditor’s Report: Improved Monitoring of Medi-Cal Managed Care Health Plans is Necessary to Better Ensure Access to Care

Health Care Services Certified Health Plans’ Provider Networks Without Verifying the Underlying Provider Network Data.

Recommendation: To ensure it is accurately analyzing the adequacy of provider network when initially certifying a health plan and when new beneficiary populations are added, by September 2015, it should establish a process to verify the accuracy of the provider network data that it uses to determine if a health plan meets network adequacy standards.

The following statement is one of several that are referenced by the State Auditor's rebuttal point 1.

Response: DHCS partially agrees with the recommendation.

The following paragraph is one of two that are referenced by the State Auditor's rebuttal point 2.

DHCS intends to enhance the current review tool to better document the steps and processes for documenting the review process and retention of working documents. Furthermore, DHCS will determine a methodology to randomly sample the data and verify the accuracy of plan submitted data. DHCS agrees with the September 2015 timeline.

Recommendation: To ensure that it can provide support for its review process related to the adequacy of provider networks, Health Care Services should maintain all documentation that supports its network certifications for three years.

Response: DHCS agrees with the recommendation.

Proper document retention is very important to DHCS. While developing the enhanced review tool and process, DHCS will ensure retention of documentation is for 3 years.

Health Care Services Does Not Verify the Accuracy of the Data Used for the Required Ongoing Provider Network Assessment.

Recommendation: To ensure that Managed Health Care reaches accurate conclusions during its quarterly assessments of the adequacy of provider networks, by September 2015, Health Care Services should establish a process to verify the accuracy of the provider network data it received from health plans and forward to Managed Health Care. For example, Health Care Services could verify, for a sample of physicians claimed as part of the health plan’s network of providers, that health plans have current written agreements with the providers.

Response: DHCS agrees with the recommendation.

DHCS agrees with the audit finding. Currently, DHCS has a process for approving provider directories and certifying and monitoring health plan networks, but had self-identified the need for verifying data in the provider file prior to this audit commencing and has already taken steps to improve the data verification process. A two-step quality check will be implemented through the DHCS Network Adequacy Monitoring Project that is underway. First, provider file data will be submitted through a system that conducts a quality check on the data elements and then DHCS will perform a survey to ensure the provider is contracted with the Medi-Cal managed care health plan.

This project has a projected implementation date of early 2016.

The Three Provider Directories We Reviewed Contained Varying Degrees of Inaccurate Information. Health Plans’ Varied Provider Directory Review Processes Likely Account for the Differing Level of Directory Errors.

Recommendation: To improve the accuracy of provider directories, by December 2015, Health Services should revise its processes for monitoring health plans’ provider directories. Specifically, Health Care Services should review how each health plan updates and verifies the accuracy of the directory. In addition, Health Care Services should identify best practices and require the plans to adopt those practices.

Response: DHCS agrees with the recommendation.

Currently, DHCS has a process for approving provider directories and certifying and monitoring health plan networks, but DHCS will enhance the current review tool to better document the steps and processes for documenting the review and retention of working documents. Furthermore, DHCS will determine a methodology to randomly sample the directories and contact providers to confirm accuracy. DHCS agrees with the September 2015 timeline for this component of the recommendation.

DHCS already has a process in place to collaborate with plans to incorporate best operational business practices through an all-plan process of feedback and recommendations before implementing any requirements. DHCS will continue to work with plans and associations to identify best practices for provider directory review and develop contractual requirements to submit to the Centers for Medicare and Medicaid Services (CMS) for review and approval. In order to ensure DHCS, plans, and associations have adequate time to work together and develop a standard that will work across the various models DHCS would look to complete this process and submit requirements to CMS by December 2015.

Health Care Services’ Process for Verifying the Accuracy of Provider Directories is Inadequate.

Recommendation: To ensure that its review of provider directories is effective in identifying inaccurate information before it approves them for publication, by September 2015, Health Care Services should establish more detailed written policies and procedures for staff to follow that will provide evidence that staff are verifying the accuracy of provider directories. This verification process should include, at a minimum, the following elements:

Developing a standard random sample selection process, including selecting a sample size that is sufficient to identify errors in the directory and enable Health Care Services to understand the accuracy of the entire directory, and ensuring that staff follow this process.

Requiring staff to maintain documentation of their reviews and verification of the accuracy of provider directories for at least three years.

Retaining its communications with the health plans about any errors found in the directories or the approval of the directories for three years.

If Health Care Services finds significant errors in a health plan’s provider directories, it should work with the health plan to identify reasons for the inaccuracies and require the health plan to develop processes to eliminate the inaccuracies.

Response: DHCS agrees with the recommendation.

DHCS strives to have plans that incorporate best operational business practices through a collaborative all plan process of feedback and recommendations before implementing any requirements. DHCS will continue to work with plans and associations to identify best practices for provider directory review and develop contractual requirements to submit to the Centers for Medicare and Medicaid Services (CMS) for review and approval. In order to ensure DHCS, plans, and associations have adequate time to work together and develop a standard that will work across the various models. DHCS agrees with the December 2015 timeline for this.

Health Care Services Cites a Lack of Resources for its Inability to Respond to all Inquiries or Requests for Assistance

Recommendation: To ensure that it can adequately handle the volume of calls from Medi-Cal beneficiaries, Health Care Services should implement an effective plan to upgrade or replace its telephone and database systems to make certain that its ombudsman office can handle the volume of calls and maintain complete data to make informed management decisions. Further, after upgrading its systems, if Health Care Services believes that it does not have adequate staffing to address workload, it should justify its need and request additional staff.

The following statement is one of several that are referenced by the State Auditor's rebuttal point 1.

Response: DHCS partially agrees with the recommendation.

DHCS identified this issue prior to this audit and has already purchased a new phone system to further enhance the Ombudsman office abilities. The phone system is currently in development and equipment is on order as of April 2015. DHCS will begin monitoring the new system upon going live and will request additional staff based on the data. DHCS expects the phone system to be operational no later than September 2015. DHCS currently has a pending request with the legislature to secure additional positions in 2015-16.

Finding Health Care Services has not Completed Annual Audits of Health Plans as State Law Requires

Recommendation: To ensure that Health Care Services complies with state law requiring it to conduct annual Medi-Cal audits, it should finish developing and begin adhering to its schedule for auditing all health plans in fiscal year 2015-16.

The following statement is one of several that are referenced by the State Auditor's rebuttal point 1.

Response: DHCS partially agrees with the recommendation.

DHCS recognized this need prior to the audit and thus has worked collaboratively with the DMHC to create an annual audit calendar in order to effectively utilize resources and leverage existing audit activities, which is scheduled to commence in July 2015. By June 30, 2016, and annually thereafter, the DHCS will be in full compliance with state statute requiring annual medical audits of all managed care plans that have been active for at least one year.

Health Care Services Has Not Always Ensured That Managed Health Care Performed all the Required Quarterly Assessments That it Has Contracted to Provide. As a Result, Health Care Services Cannot Adequately Verify That Health Plans are Ensuring That Medi-Cal Beneficiaries Have Adequate Access to Care

Recommendation: To ensure that Health Care Services complies with state law, it should increase its oversight of Managed Health Care to ensure that it completes the quarterly assessments required under the agreements.

Response: DHCS Disagrees with the recommendation.

DHCS disagrees with the audit finding. DHCS had little to no discussion with the audit team relative to oversight of the interagency agreements.

During such a discussion, DHCS would have provided information demonstrating that two separate Units focus on oversight of and work associated with the interagency agreements: 1) the Contract Compliance Unit ensures that DMHC Medical Surveys and subsequent corrective action plans are completed and has a robust tracking tool to ensure these processes occur, and 2) the Managed Care Operations Unit partner’s with DMHC to send joint network adequacy letters to the Medi-Cal managed care health plans on a quarterly basis.

No specific information is included in the audit report about DHCS’ oversight of the interagency agreements.

California State Auditor's Comments on the Response From the California Department of Health Care Services

To provide clarity and perspective, we are commenting on the California Department of Health Care Services’ (Health Care Services) response to our audit. The numbers below correspond to the numbers we placed in the margin of Health Care Services’ response.

It is unclear what Health Care Services means when it states that it partially agrees with our findings and recommendations. In its responses to these recommendations, Health Care Services outlines actions that it plans to take to fully implement them.

Health Care Services appears to downplay the importance of our finding and recommendation. We reviewed those areas of Health Care Services’ monitoring activities that we identified as significant to the scope of our audit, which focused on the adequacy of networks of primary care physicians (provider networks) and the accuracy of provider directories. Specifically, as we discuss here, we reviewed Health Care Services’ certifications of three California Medical Assistance Program (Medi-Cal) managed care health plans (health plans) when the State eliminated the Healthy Families Program and moved most of its participants into health plans within Medi-Cal. We also reviewed one initial plan certification that we discuss here. Further, we reviewed quarterly assessments of network adequacy, Health Care Services’ process for ensuring the accuracy of provider directories, the processing of complaints and related data by Health Care Services’ Medi-Cal Managed Care Office of the Ombudsman, and the completion of the required annual medical audits, which we discuss in the following four areas: A, B, C, and D, respectively. Notwithstanding any other activities that Health Care Services might perform, the fact remains that we identified several areas of needed improvement in its monitoring of health plans to better ensure access to care.

We acknowledge here that Health Care Services and the California Department of Managed Health Care (Managed Health Care) coordinate the timing of their reviews and coordinate their efforts to eliminate contradictions in their reports. We also discuss coordination efforts here. However, as we state here, although state laws allow the two departments to rely on each other’s work, neither department has done so. Given the overlapping focus of the two departments’ reviews, there is an opportunity to reduce or eliminate duplication of work. We also discuss here why we believe that Managed Health Care should rely on Health Care Services’ reviews for information that falls under the review areas that overlap.

Health Care Services appears to be confused about our finding and related recommendation. During the audit, we were aware of Health Care Services’ oversight of the interagency agreements. In its response, Health Care Services references two units’ focus on oversight of and work associated with its agreements with Managed Health Care. The medical surveys, the related corrective action plans, and the tracking tool that Health Care Services cites were not related to the quarterly network adequacy reviews that Managed Health Care performs, and were not significant to the scope of our audit, which focused on the adequacy of provider networks and accuracy of provider directories. Further, we did review the joint efforts of Health Care Services and Managed Health Care to follow up on the results of the quarterly network adequacy reviews that Managed Health Care performed. However, our finding beginning here and related recommendation focus on the quarterly reviews that Managed Health Care did not perform as required under one of the two agreements between the two departments. Health Care Services is ultimately responsible for ensuring that its contractor provides the required services covered under both its agreements. Therefore, we stand by our recommendation that Health Care Services increase its oversight of Managed Health Care to ensure that it completes the quarterly assessments required under the agreements.

Response From the California Department of Managed Health Care

Department of Managed Health Care
980 9th Street, Suite 500
Sacramento, CA 95814-2725
916-324-6870 Phone
916-322-2579 Fax
Gabriel.Ravekdmhc.ca.aov

May 27,2015

Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Dear Ms. Howle:

Thank you for providing the Department of Managed Health Care (DMHC) with the opportunity to review and respond to the California State Auditor’s draft audit report. Attached with this letter for inclusion in the final report is the DMHC’s response to the draft report’s findings relative to the DMHC.

Sincerely,

Signed by Gabriel Ravel

Gabriel Ravel
General Counsel
Department of Managed Health Care

Department of Managed Health Care (DMHC) Formal Response to Draft Audit Report Recommendations

Recommendation #1. To ensure that Managed Health Care complies with its contractual obligations, it should continue its plan to perform quarterly reviews of the adequacy of provider networks beginning with the first quarter of 2015. Managed Health Care should monitor workload closely and if it determines it does not have adequate staffing to perform quarterly reviews, it should justify and request additional staff.

Response:

The DMHC agrees with the recommendation and is continuing its plan to perform quarterly reviews.

The DMHC network assessments conducted pursuant to the Interagency Agreement will involve complete reviews of the PCP, specialist, mental health, and hospital networks in the 28 counties. This review will be in addition to the quarterly Medi-Cal network reviews for the 30 original counties it has conducted since 2011, pursuant to its 2011 Interagency Agreement with the DHCS. Although the focus of the 2011 Interagency Agreement was on Seniors and Persons with Disabilities, the DMHC has always included an overall evaluation of the availability of providers and their impact on access for all Medi-Cal enrollees as part of its quarterly assessment. This broader review occurs equally for the 28 additional counties.

In accordance with the DMHC’s existing quarterly Medi-Cal network assessment process for the original 30 counties, the network assessments for the additional 28 counties has included, and will continue to include, an evaluation of network capacity and geographic access of each Medi-Cal Managed Care plan in each county. To accomplish this, the DMHC will follow the methodology currently utilized in the quarterly Medi-Cal network review process, as follows:

Identify primary care and specialist providers’ ability to accept new patients, capacity, areas of specialty, and geographic accessibility in accordance with Knox Keene requirements and the DHCS contract standards;
Analyze detailed provider data to evaluate whether physician extenders add to the capacity of the plans’ primary care network;
Calculate provider-to-enrollee ratios;
Identify which network providers have admitting privileges with contracted hospitals;
Evaluate individual health plan grievances and complaints received by the Ombudsman and DMHC related to access to care that may indicate a network inadequacy;
Review DMHC block transfer data for any potential disruptions to networks due to provider contract terminations;
Evaluate out-of-network requests to determine any areas of specialty care where members are having difficulties obtaining in-network care; and
Review quality reports to identify quality issues related to network inadequacies.

In addition to the quarterly network assessments, all Knox-Keene licensed Medi-Cal plans are subject to full network reviews in the event of service area expansions, new license applications, or block transfers. With regard to the 28 counties identified in the State Auditor’s report, all Knox-Keene licensed health plans that sought to participate in Medi-Cal Managed Care in those 28 counties were subject to complete DMHC network reviews conducted as a result of the service area expansion and new license application filings required under the Knox Keene Act. Additionally, the DMHC notes that the Medi-Cal plans participating in the 28 counties were also reviewed over the course of the Healthy Families transition to Medi-Cal in 2013, as required under AB 1494. Finally, beginning in 2015, all Medi-Cal networks will also be reviewed annually as required by SB 964. These steps will ensure that the DMHC meets its contractual obligations.

Planned completion date: Review of network data will resume immediately upon receipt of the network data in May 2015.

Recommendation #2. To increase the efficiency of statutorily required reviews by eliminating duplicative work, by September 2015, Managed Health Care should complete its planned assessment of the extent to which it can rely on Health Care Services’ annual audits. If it determines that Health Care Services’ work is sufficient to meet Managed Health Care’s responsibility under the Knox-Keene Health Care Service Plan Act of 1975, it should coordinate with Health Care Services to eliminate the duplication of work.

Response:
The DMHC concurs with this recommendation. Prior to this audit finding, both Departments recognized the need for better collaboration and have begun holding discussions on how to avoid duplication of review efforts.

While the DMHC is statutorily required to conduct its own surveys of Medi-Cal Managed Care Plans, it recognizes the substantial overlap between its survey process and the audits conducted by Health Care Services. Although significant steps have been taken to coordinate the two processes, the DMHC continues to work closely with DHCS to identify areas of overlap and better coordinate to avoid duplication of effort and preserve resources.

Presently, the two Departments meet frequently, as often as every other week, and share audit tools, coordinate survey logistics, and share audit findings and corrective actions. Additionally, the DMHC is committed to fully assessing the work performed by Health Care Services in order to identify all opportunities to incorporate their findings into DMHC’s survey process, thereby eliminating the duplicative use of resources.

Planned completion date: September 2015.