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Department of Health Care Services
It Has Not Ensured That Medi-Cal Beneficiaries in Some Rural Counties Have Reasonable Access to Care

Report Number: 2018-122

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Chapter 1


Chapter Summary

The Regional Model health plans have not provided all beneficiaries with adequate access to care. As a result, some beneficiaries in Regional Model counties may have had to travel hundreds of miles to receive medical care from in‑network providers of one health plan, even though the same care was available from closer providers who contracted with the other health plan. During the period we reviewed, DHCS failed to hold health plans accountable when they did not provide beneficiaries with access to care that met state requirements. Instead, it reduced the plans’ incentives to improve their provider networks by excusing them from meeting these requirements, even though it had not ensured that they had exhausted all of their reasonable options to secure local providers as state law requires. Our analysis indicates that some beneficiaries’ access to care would improve dramatically if DHCS were to require health plans to allow beneficiaries to obtain care from out‑of‑network providers that are closer to them when the plans are unable to provide adequate access themselves.

Additionally, the HEDIS scores for health plans in the rural expansion counties indicate that beneficiaries in these counties have generally received a lower quality of care than beneficiaries in other areas of the State. According to the HEDIS scores, the quality of care that Anthem and Health & Wellness provided in the Regional Model counties was comparable to the care that Partnership—a COHS that serves eight rural expansion counties—provided in its counties. However, Managed Health Care’s audits of the rural expansion counties suggest that Anthem and Health & Wellness experienced greater difficulty meeting contractual requirements pertaining to quality of care than Partnership did. In addition, DHCS has limited the counties’ abilities to respond to those problems and assist their beneficiaries in receiving adequate services because it has not taken adequate steps to share with the counties the deficiencies it and Managed Health Care have identified.

Some Beneficiaries in Regional Model Counties Have Had Poor Access to Care

The Regional Model health plans have required some beneficiaries to travel excessive distances to obtain medical care from providers. In most cases, managed care beneficiaries may receive medical care only from the contracted providers within their plan’s network. In this way, health plans choose the providers that beneficiaries may visit to obtain medical care. Within the Regional Model counties, the distances that beneficiaries have had to travel to access the closest contracted providers have varied widely, from less than 10 miles to 365 miles. Table 2 identifies the distances some beneficiaries within these counties have had to travel to receive specific health care.

Table 2
The Regional Model Health Plans Have Required Some Beneficiaries to Travel Unreasonable Distances
to Access Care

Specialty Care
Cardiology/Interventional Cardiology 239 115 60
Dermatology 272 365 60
Endocrinology 313 225 60
ENT/Otolaryngology 343 200 60
Gastroenterology 83 150 60
General Surgery 123 115 60
Hematology 99 200 165
HIV/AIDS Specialists/Infectious Diseases 324 140 60
Mental Health (Nonpsychiatry) Outpatient Services* 83 60 60
Nephrology 124 230 60
Neurology 300 215 60
OB/GYN Specialty Care* 164 60 60
Oncology 299 170 120
Ophthalmology 81 60 120
Orthopedic Surgery 164 150 60
Physical Medicine and Rehabilitation 327 220 120
Psychiatry 327 170 60
Pulmonology 327 180 60
Primary Care
OB/GYN Primary Care NA 230 10
Primary Care Physician 10 85 45
Other Provider Types
Hospital 81 120 45
Pharmacy 45 90 10

Source: Analysis of the most recent alternative access standards that DHCS had approved as of January 2019.

NA = Not applicable.

* We include OB/GYN Specialty Care and Mental Health (Nonpsychiatry) Outpatient Services with other specialists because they have the same time and distance standards.

Anthem was exempt from this requirement because it does not designate its OB/GYN providers as primary care physicians.

Although it may be difficult for health plans to provide beneficiaries with close access to care when those beneficiaries reside in remote regions of the State, we would expect this difficulty to equally affect all the health plans that serve rural counties. However, as Table 2 also shows, Partnership provided its beneficiaries in rural counties with access to most care within 60 miles. Moreover, the longest distances beneficiaries had to travel to receive care in Partnership’s counties were generally much shorter than those that Regional Model beneficiaries were required to travel for the same care. For example, Table 2 shows that Partnership required rural beneficiaries to travel up to 60 miles for an appointment with a cardiologist compared to 239 miles for Anthem and 115 miles for Health & Wellness. The additional distances that Anthem and Health & Wellness have required their beneficiaries to travel may have deterred some beneficiaries from seeking care.

We also identified inconsistencies between the distances that Anthem and Health & Wellness required their beneficiaries from the same locations to travel for the same care. When we reviewed provider location data that the two health plans submitted to DHCS, we identified more than 100 instances in which either of the plans required its beneficiaries to travel at least 100 miles farther than the other plan for the same care. In the five most extreme cases, the difference between the two plans ranged from 255 to 305 miles. For example, DHCS’ data indicate that a beneficiary of Health & Wellness residing in June Lake, in Mono County, who needed to take her child to a pediatric dermatologist would have been required to travel up to 365 miles while if the same beneficiary were with Anthem, she would only have been required to travel up to 60 miles.

On some occasions, Anthem and Health & Wellness each required its beneficiaries to travel significantly farther than the other plan required of its beneficiaries. As Figure 2 shows, a beneficiary of Health & Wellness residing in Olancha, in Inyo County, who needed to see an oncologist would have to travel more than 150 miles to Burbank to receive cancer treatment. However, if this same beneficiary were with Anthem, he would have to travel only 60 miles for the same care. Similarly, a beneficiary of Anthem residing in Tecopa, also in Inyo County, who needed to see a pulmonologist, would have had to travel 327 miles, which is more than 175 miles farther to receive asthma treatment than if she were with Health & Wellness.

Figure 2
The Two Regional Model Health Plans May Require Beneficiaries in the Same Location to Travel Significantly Different Distances to Receive the Same Services

Figure 2 is a map that shows the significantly longer distance a Health & Wellness beneficiary would need to travel from the same location as an Anthem beneficiary to obtain the same care.

Source: Analysis of the alternative access standards that DHCS had approved as of January 2019, Anthem’s Medi-Cal provider directory, and Google Maps.

The differences in the distance requirements between the two health plans are also noticeable in more densely populated areas of the Regional Model counties. For example, according to the January 2019 data, a beneficiary of Health & Wellness who needed to take his child to visit a pediatric cardiologist and who resided in the Lake Tahoe community of Kings Beach in Placer County—which is more densely populated than many other rural expansion counties—would have to travel up to 70 miles farther than an Anthem beneficiary from the same location who sought that same service. As we discuss in more detail below, these instances suggest that the difference in distances is not always the result of a general lack of providers but rather a lack of providers who have contracted with a specific Regional Model health plan. In other words, some beneficiaries may live reasonably close to providers who offer the needed care; however, those providers are not in‑network for their plans. Although beneficiaries have the right to switch health plans, doing so may disrupt the continuity of the care they receive because they may not be able to continue seeing their primary care physicians and other providers from whom they have already received care.

Traveling significant distances to reach providers may limit beneficiaries’ ability to receive care. A beneficiary who has to travel hundreds of miles to receive medical care might be forced to miss an entire day of work and lose wages—a loss that might be critical considering that beneficiaries who qualify for Medi‑Cal while employed have limited incomes. Further, some beneficiaries might be unable to tolerate the physical hardship of traveling such substantial distances for health care. When health issues require multiple visits, it likely will exacerbate such concerns: for example, the U.S. Department of Health and Human Services suggests weekly appointments for pregnant women nearing their delivery dates.

Although state law requires health plans to provide transportation services to their beneficiaries in some instances, the beneficiaries would still incur significant travel time for extensive distances.

If beneficiaries are unwilling or unable to seek care because of the distances required to do so, it undermines the fundamental purpose of the Medi‑Cal program, which is to improve the overall health and well‑being of all residents by providing access to affordable, integrated, and high‑quality health care.

DHCS Has Failed to Hold Regional Model Health Plans Accountable for Improving Beneficiaries’ Access to Care

As we discuss in the Introduction, DHCS uses a network certification process to assess whether health plans are complying with state access requirements. DHCS published the initial results of its first annual network certification in June 2018 and finalized the results in January 2019. These results, which remain in effect until July 2019, indicate that DHCS granted alternative access standards to the State’s health plans in nearly 10,000 instances in which they requested them. More than 1,000 of these 10,000 instances involved the Regional Model health plans. On our website, we present an interactive map of the extended distances DHCS approved through alternative access standards by county and provider type. Given that DHCS made a considerable effort in 2016 and 2017 to ensure that the access requirements that state law established were reasonable and that this effort included analyzing the availability of providers who could meet those requirements, we question why it has chosen not to enforce them. By approving alternative access standards, DHCS is not holding health plans accountable to meet the access requirements prescribed in state law. Instead, alternative access standards allow health plans to deviate from the prescribed requirements by extending the time and distance that they may require beneficiaries to travel for care.

We are particularly concerned with DHCS’ decision not to enforce these state requirements given the weaknesses we identified in its process for evaluating requests for alternative access standards. In particular, although DHCS denies requests for alternative access standards if they are incomplete or inaccurate, it has not adequately evaluated whether health plans have, in fact, exhausted all other reasonable options to identify providers that would meet the access requirements before approving their requests for alternative access standards, as state law requires. DHCS stated that it must approve requests for alternative access standards, no matter what the potential hardship those alternative standards may present to beneficiaries, as long as the health plans meet legal requirements, specifically that the plan exhausts all other reasonable options to contract with providers that would meet the access requirements. DHCS requires health plans to provide written explanations of their contracting efforts that it uses to evaluate whether they have complied with this requirement. However, DHCS does not analyze the validity of these explanations; thus, its approach does not meet the apparent intent of the law.

Even though DHCS has required health plans to provide written explanations, it has not required them to provide supporting documentation to corroborate those explanations. Moreover, DHCS has not verified with any providers mentioned in those explanations whether the plans attempted to add them to their networks. Additionally, DHCS has not established a minimum number of providers that the health plans should attempt to contract with in a designated location before it considers an exemption request. We question how DHCS could conclude that a health plan had exhausted all reasonable efforts to seek providers that met an access requirement without establishing such a minimum threshold and substantiating at least some of the health plan’s efforts.

Moreover, DHCS has not consistently enforced its requirements for the explanations health plans must include when requesting alternative access standards. DHCS’ instructions for making such requests state that health plans must detail their efforts to meet the access requirements in order for it to consider their requests. However, when we reviewed a selection of 30 approved requests for alternative access standards, we found six requests in which health plans prepared their explanations using the same boilerplate text for multiple requests. For example, Health & Wellness stated all of the following as its justification in each request for a pediatric specialist we reviewed: “There are no pediatric subspecialists located to meet the standard, the available pediatric specialists do not accept Medi‑Cal patients, or the available pediatric specialists have declined to contract with the Plan primarily due to capacity constraints.” In none of these cases did the plan identify the specific condition that applied to the request. Similarly, Anthem stated in some requests that no providers were in the area, yet we identified providers in the area that met the prescribed requirements. We determined that DHCS did follow up in some instances by requesting additional documentation when the health plan provided vague or inaccurate explanations, such as when it submitted a request with inaccurate provider information. DHCS acknowledged that its staff did not consistently identify when further clarification was necessary. This inconsistency can likely be attributed to DHCS’ lack of formal guidance specifying the conditions under which a request should be approved or denied.

By approving alternative access standards without proper justification, DHCS has reduced incentives for health plans to improve their beneficiaries’ access to care. When a health plan fails to comply with the access requirements specified in state law, DHCS has the authority to require that it complete a corrective action plan (CAP) to improve its provider network, which DHCS calls a network certification CAP. Network certification CAPs require health plans to make the necessary improvements to comply with the access requirements, such as contracting with providers that meet the travel distance requirements. DHCS initially placed health plans on network certification CAPs in 2018 but closed them after approving alternative access standard requests for those health plans that were still unable to meet access requirements. However, it approved those requests even when the health plans did not demonstrate that they had exhausted all reasonable options to obtain closer providers. As a result, DHCS’ approval of such alternative access standards involving excessive distances was unreasonable. By enforcing network certification CAPs rather than approving unsupported requests for alternative access standards, DHCS could have ensured that health plans remained obligated to improve their networks.

Further, DHCS could have used network certification CAPs to provide some beneficiaries access to closer providers. Through such CAPs, DHCS may require health plans to temporarily allow beneficiaries to obtain medical care from out‑of‑network providers, provided that those out‑of‑network providers do not have a history of quality issues and are willing to accept reasonable rates as determined by the health plans. Although there is no assurance that out‑of‑network providers will agree to offer such care, a network certification CAP requiring plans to authorize out‑of‑network care to meet time and distance requirements would provide beneficiaries with greater opportunities to access care. As we previously describe, we identified multiple instances under the Regional Model in which either health plan’s nearest in‑network provider was significantly farther than the other health plan’s provider. In such cases, the ability to seek care from out‑of‑network providers could significantly improve some beneficiaries’ access to care.

DHCS expressed concern to us that providers might demand unreasonably high rates from health plans if they were aware that DHCS would not approve certain requests, which could burden the health plans financially and could result in increased rates that DHCS would have to pay the health plans. However, we disagree with this reasoning. DHCS could enforce the state requirements on the distances health plans may require beneficiaries to travel but allow exceptions if there are no closer providers or if health plans can demonstrate that the rates providers have requested are unreasonably high. Although DHCS requests that the health plans provide rate information when requesting alternative access standards, in practice it has not required them to do so. None of the health plans provided this information for the 30 requests that we reviewed. When health plans are unable to demonstrate that nearby, available providers are demanding unreasonably high rates, neither they nor DHCS can justify the reasonableness of their requests for alternative access standards that require beneficiaries to travel excessive distances.

When we asked DHCS for its perspective regarding the weaknesses we identified in its process for evaluating and approving requests for alternative access standards during its 2018 network certification, DHCS indicated that it intends to continually adjust its procedures for evaluating health plans’ requests based on the lessons it learns through each annual certification. However, DHCS did not inform us of the specific outcomes it desires to achieve through its adjustments. Instead, it informed us that as part of the 2019 network certification that it expects to complete in January 2020, it has already made changes to its process and anticipates implementing additional changes as part of its next network certification in 2020.

Although DHCS’ recent efforts may address some elements of its process, these efforts do not resolve certain concerns we identified pertaining to access to care. For instance, DHCS informed us that it plans to reject health plans’ requests that do not include supporting documentation to demonstrate that they attempted to contract with closer providers. However, we believe that this approach is insufficient because, according to DHCS, it would only be requiring health plans to demonstrate attempts to contract with a single provider. Consequently, that effort would not fulfill the intent of state law—requiring health plans to exhaust all reasonable options to obtain providers that meet access requirements—because health plans would likely have multiple providers available to them that they could attempt to contract with. Additionally, DHCS indicated that it plans to deny requests that it deems unreasonable, yet it has not developed formal guidance for its staff to use in making that determination. Without establishing such guidance for its staff and ensuring that health plans attempt to contract with multiple providers, DHCS will likely continue to approve requests that unjustifiably excuse health plans from their obligation to meet access requirements and allow them to require beneficiaries to travel unreasonable distances to obtain care.

The Structure DHCS Selected for the Regional Model May Have Contributed to Some Beneficiaries’ Inadequate Access to Care

DHCS was unable to offer a definitive explanation as to why Anthem and Health & Wellness could not provide their beneficiaries with better access to care. Managers at DHCS responsible for overseeing the approval of health plans’ alternative access standard requests identified three potential causes of the excessive distances some beneficiaries may be required to travel: a lack of available providers, providers that contract with only one health plan rather than multiple plans, and providers that are unwilling to accept the payment rates that the health plans offered. Our analysis showed that a significant number of providers in the Regional Model have not contracted with either Anthem or Health & Wellness. However, we could not determine whether doing so would have improved beneficiaries’ access to care because the data we evaluated did not identify the noncontracting providers’ potential Medi‑Cal specialties or all of the locations where they provide care. Nevertheless, our findings support the explanation that many providers contracting with only one of the two Regional Model health plans likely contributed to poor access. Additional analysis is necessary to determine whether a lack of providers in specific geographic areas of the Regional Model or their unwillingness to accept offered payment rates has contributed to the access issues.

When we analyzed licensing data from the Medical Board of California and the Osteopathic Medical Board of California—two entities responsible for licensing doctors in the State who participate in Medi‑Cal—and provider network data from the health plans, we found that Anthem and Health & Wellness contracted with more than 3,900 providers located in the Regional Model counties. However, more than 1,900 additional providers in the Regional Model counties had not contracted with either health plan to provide services within these counties. It is unclear whether the two health plans contracting with these providers would improve beneficiaries’ access to care. For example, some of these 1,900 providers may be located near beneficiaries who do not experience challenges with limited access.

We believe that DHCS would benefit from knowing the locations within the Regional Model counties that require additional providers and the types of providers required in those areas. If it had such knowledge, DHCS could determine the extent to which a lack of providers is causing some beneficiaries’ poor access to care, and it could also develop the appropriate strategies to alleviate those provider shortages. DHCS indicated that it would be willing to assist in an analysis of this nature, but that other state departments—such as the Office of Statewide Health Planning and Development—would be better suited to address workforce shortages among providers. Nonetheless, given DHCS’ critical role in overseeing the State’s provision of Medi‑Cal services, we believe that it is well positioned to oversee such an analysis.

Our findings related to providers who contract with only one of the two plans are more straightforward. According to the data that the two health plans reported to DHCS in December 2018, fewer than 29 percent of the providers that contracted with either Anthem or Health & Wellness contracted with both health plans concurrently. Our analysis shows that some beneficiaries in the Regional Model would have significantly better access to care if they were able to seek it from the provider networks of both health plans. To evaluate how beneficiaries’ access to care would change if they had access to both networks, we reviewed DHCS’ data related to the health plans’ adherence to the time and distance requirements specified in state law. During its first annual network certification, DHCS identified more than 700 instances in which one or both Regional Model plans failed to meet these access requirements.

We excluded OB/GYN primary care from this analysis because DHCS informed us that it exempted Anthem from the access requirement for OB/GYN primary care. As a result, DHCS does not have sufficient data for us to conclude how often both Regional Model plans are meeting the access requirement for OB/GYN primary care.

However, if the Regional Model’s beneficiaries had access to both health plans’ provider networks, we estimate that this number would decrease to about 125, the number of instances in which both plans failed to meet the same access requirements in the same locations.

This difference reinforces our conclusion that DHCS could improve beneficiaries’ access to care if it required plans to authorize out‑of‑network care when they do not demonstrate that they have exhausted all of their reasonable options to contract with providers that meet the state requirements and when DHCS determines that significantly closer providers of the needed care are available. The difference also underscores the supposition that the providers’ tendency to contract with only one of the two Regional Model health plans has contributed to some beneficiaries’ poor access to care. The geographic distribution of providers in rural areas already makes it difficult for health plans to provide adequate access to care; when providers do not contract with multiple plans, it can further compound this difficulty.

Given that Partnership operates in comparably remote areas of the State, its ability to provide significantly better access to care than the Regional Model plans suggests that beneficiaries in rural counties may receive better access to care when those counties operate under a single health plan rather than multiple plans. As part of DHCS’ annual network certification, Partnership requested alternative access standards for 11 of the 39 types of providers that DHCS measures. In comparison, Health & Wellness and Anthem requested alternative access standards for 35 and 37 of the 39 provider types, respectively. Unlike the Regional Model, the structure of a COHS—such as Partnership—allows only one health plan in each county, meaning beneficiaries in COHS Model counties all have access to the same providers. We believe that this feature of the COHS Model may have contributed to Partnership’s ability to provide better access to care in some rural areas of the State. We discuss the benefits of the COHS Model in greater detail in Chapter 2.

Increasing beneficiaries’ access to providers currently outside of their networks could require some beneficiaries to schedule appointments farther in advance. However, the reduction in the distances the beneficiaries would have to travel might well outweigh this additional effort. As we mention in the Introduction, state law requires most health plans to ensure that their providers offer appointments within a specific number of days of the request for services. According to DHCS, if more Medi‑Cal providers were to provide care to beneficiaries in both health plans, it might strain some providers’ capacities and reduce their ability to meet this requirement. However, state law permits providers to extend the waiting time for appointments if they determine that waiting longer would not negatively affect the health of the beneficiaries involved. This exception could permit beneficiaries to make individual choices that are both safe and potentially more convenient. We believe that in certain circumstances beneficiaries might be willing to schedule appointments farther in advance if doing so would shorten how far they would have to travel. For example, the parent of a child with a heart condition requiring routine cardiology appointments might be willing to schedule those appointments farther in advance to avoid having to drive an additional 70 miles each direction.

Given Partnership’s ability to provide its beneficiaries with better access to care and the apparent tendency of providers to contract with either but not both of the Regional Model health plans, we question whether having two separate health plans best serves the Regional Model counties. Conducting an assessment to identify the locations within the Regional Model that need additional providers and the types of providers necessary could offer DHCS valuable perspective on whether access issues in the Regional Model are the result of provider shortages, the structure of the model, or both.

In 2016 DHCS commissioned an access assessment that may assist it in identifying and resolving shortages of providers in the Regional Model. DHCS commissioned the assessment in response to federal requirements issued in 2015. According to documentation provided by DHCS, the completed assessment will include maps comparing the number of providers for each specialty and each health plan with the number of beneficiaries. The assessment will also identify the percentage of available providers for each specialty that each health plan is contracting with, the average distance between beneficiaries and each health plan’s closest primary care physicians and hospitals, and recommendations for addressing systemic deficiencies it identifies. DHCS plans to finalize the assessment in October 2019. This assessment should enhance DHCS’ knowledge of the locations throughout the State, including those in the Regional Model counties, that are lacking certain types of providers.

Regional Model Health Plans Have Not Provided an Acceptable Quality of Care to Beneficiaries

Although most health plans in the State have not met some of their contractual requirements related to quality of care, the health plans that serve the 28 rural expansion counties have consistently delivered a lower quality of care to beneficiaries than the health plans delivering services to beneficiaries in other areas of the State. Further, Managed Health Care’s audits of the rural expansion counties suggest that the Regional Model health plans have had more difficulty than Partnership in meeting their contractual requirements related to quality of care.

Our review of HEDIS data from 2015 through 2018 found that the Regional Model health plans failed to meet a significant number of minimum performance levels. As the Introduction explains, DHCS requires health plans to meet minimum performance levels for key HEDIS measures related to the quality of care that they provide to beneficiaries. However, both Anthem and Health & Wellness scored below minimum performance levels for at least 24 percent of these HEDIS measures for each of the four years for which the data were available. For instance, neither of the two plans conducted an adequate number of breast cancer screenings in 2018. As Table 3 shows, the two Regional Model plans scored extremely poorly in 2016: Anthem and Health & Wellness failed to meet an average of 12 and 14, respectively, of the 22 minimum performance levels. To supplement these figures on the number of HEDIS measures below the minimum performance level, we present an interactive map on our website that shows by county, plan, and measure the percent of HEDIS scores below the minimum performance levels during the past four years.

Table 3
The Regional Model Health Plans and Partnership Have Provided a Similar Quality of Care in the Rural Expansion Counties

2015 22 9.5 10.5 10.5
2016 22 12 14 11
2017 18 6.5 7.5 8
2018 21 5 6 6

Source: Analysis of HEDIS data.

Note: Anthem, Health & Wellness, and Partnership report on their performance using reporting units made up of groups of counties. We averaged their scores in each of their rural expansion county reporting units to determine their overall performance in the rural expansion counties.

* Excludes measures for which DHCS has not specified a minimum performance level.

Excludes Kaiser Permanente, which operates in a limited manner in three of the 18 Regional Model counties.

Excludes Lake County, which is part of the rural expansion. Partnership reports Lake County’s data as part of a group of counties that includes three counties that were not in the rural expansion.

The HEDIS data indicate that although the quality of care the Regional Model health plans provided was comparable to the quality of care in the other rural expansion counties, it was lower than the quality of care in the rest of the State. As Table 3 shows, the performance of Anthem and Health & Wellness within the 18 Regional Model counties was similar to Partnership’s performance in its rural expansion counties. However, Table 4 shows that the rural expansion health plans’ average performance was well below the average performance of the plans serving the counties in the rest of the State. Improvements in the HEDIS scores of the Regional Model plans since 2016 have reduced the gap between the Regional Model counties and other areas of the State. According to the quality and monitoring chief, the improvements in these health plans’ HEDIS scores indicate that their quality of care has improved as a result of a CAP—which it refers to as a quality CAP—that it imposed when they fell below standards.

Table 4
Beneficiaries in the Rural Expansion Counties Have Received a Lower Quality of Care Than Other Beneficiaries in the State

2015 22 10.2 4.1
2016 22 12.3 6.7
2017 18 7.3 4.7
2018 21 5.7 2.3

Source: Analysis of HEDIS data.

* Excludes measures for which DHCS has not specified a minimum performance level.

Excludes Kaiser Permanente, which operates in a limited manner in three of the 18 Regional Model counties. Also excludes Imperial and
San Benito counties, which Anthem and Health & Wellness serve outside the Regional Model.

Includes Lake County, which is part of the rural expansion. Partnership reports Lake County’s data as part of a group of counties that includes three counties that were not in the rural expansion.

Other measures suggest that the Regional Model plans have struggled more than Partnership in meeting their contractual requirements for quality of care. As we discuss in the Introduction, both DHCS and Managed Health Care perform routine audits to verify whether health plans are complying with legal and contractual requirements that affect quality of care. However, these audits generally cover each plan’s performance throughout the State, without indicating the particular model or county with which the departments have identified deficiencies. Consequently, the audits do not address conditions that are specific to the Regional Model plans. Nonetheless, under the terms of an interagency agreement between DHCS and Managed Health Care for 2014 through 2016, Managed Health Care conducted an audit of each of the three health plans—Anthem, Health & Wellness, and Partnership—that focused on their legal and contractual compliance within the 28 rural expansion counties. These audits suggest that the Regional Model health plans had greater difficulty meeting their contractual requirements than Partnership did.

Managed Health Care identified contractual and legal violations that all three health plans committed in the rural expansion counties, but it identified potentially more serious deficiencies in its reviews of Anthem and Health & Wellness than of Partnership. For example, Managed Health Care determined that both Anthem and Health & Wellness failed to properly document and address potentially significant grievances and other quality issues pertaining to inadequate care, including a cardiac arrest caused by a medication error and a provider’s failure to detect a serious infection. The health plans’ failure to properly address these reported quality issues may have exposed beneficiaries to harm. In contrast, Managed Health Care’s findings related to Partnership did not indicate significant risks to beneficiaries’ health. For example, Managed Health Care found that Partnership resolved grievances promptly but did not always list the dates it received the grievances when responding to beneficiaries.

DHCS has taken steps to ensure that the health plans have resolved the deficiencies that Managed Health Care’s audits identified. As part of its interagency agreement, DHCS used quality CAPs to address these violations. In our April 2019 audit report, Department of Health Care Services: Although Its Oversight of Managed Care Health Plans Is Generally Sufficient, It Needs to Ensure That Their Administrative Expenses Are Reasonable and Necessary, Report 2018‑115, we determined that DHCS’ process to oversee health plans’ quality of care—including quality CAPs—was generally sufficient.

DHCS Has Not Effectively Communicated to Counties When It Identified Quality of Care Deficiencies

Although DHCS has generally complied with state and federal reporting requirements, it could do more to inform county officials when it identifies significant quality of care issues with the Regional Model health plans. Federal and state laws require DHCS to publicly report different elements of its monitoring efforts, and DHCS complies with these requirements by publishing its HEDIS results and medical audit reports on its website. However, it has not adequately educated counties about all the types of monitoring that it performs, such as the medical audits we previously discuss and the corresponding CAPs, which DHCS calls medical audit CAPs. Through its medical audits, DHCS evaluates health plans’ performance and compliance with contractual requirements in six categories: utilization management, case management and coordination of care, access and availability of care, member rights, quality management, and administrative and organizational capacity. If stakeholders are not aware of DHCS’ monitoring efforts, they are unlikely to seek out the results of those efforts. Moreover, when it completes its audit reports, DHCS does not notify counties or distribute the reports to them, thereby placing the responsibility on the counties to review its website regularly to become aware of new medical audit findings.

Further, DHCS does not promptly update its website with its medical audit reports, which delays stakeholders’ ability to review those results. For example, DHCS issued its most recent audit of Anthem in August 2018; however, it still had not made the results publicly available as of July 2019. DHCS explained that it waits until the health plans complete the medical audit CAPs pertaining to their audits before it publishes the audit results on its website. Although state law allows this delay, counties could better assist their beneficiaries if DHCS informed them of performance issues more promptly. We believe that DHCS should publish medical audit results as they become available and then post the completed medical audit CAPs later. DHCS said it would consider making this change.

By providing counties with information about the significant quality of care issues that it identifies, DHCS could better enable them to help beneficiaries receive the care to which they are entitled. County representatives indicated that they were aware of beneficiaries’ difficulties with receiving appropriate care, and that in some cases, beneficiaries have reached out to them directly to report issues. Information about problems that DHCS has identified with health plans’ performance would likely assist counties in their efforts to help these beneficiaries, particularly when DHCS has identified violations of beneficiaries’ rights. For example, DHCS concluded in a 2017 audit that Health & Wellness had wrongfully denied a beneficiary an evaluation to determine whether he was eligible for an organ transplant, even though a physician recommended an evaluation and the health plan’s contract with DHCS entitled its beneficiaries to such evaluations. If DHCS consistently informed counties of such problems, the counties would be better positioned to assist other beneficiaries who are facing similar issues.

To obtain the counties’ perspectives on DHCS’ outreach efforts, we spoke with representatives of county health agencies in a number of rural expansion counties. Representatives of seven of these counties were unfamiliar with the full scope of DHCS’ monitoring efforts, and representatives of five stated that they did not even know that DHCS conducted medical audits. In general, most of these individuals who we spoke with stated that they would like DHCS to be more proactive in notifying them when it identifies serious deficiencies in their county’s health plans.

The representatives’ comments suggest that counties would benefit if DHCS issued a periodic form of communication, such as a newsletter. In fact, one county representative described DHCS’ website as overwhelming, and another said that it is difficult to find the reports about health plans’ performance levels on that website. Another county official explained that her staff lack the time to review the website regularly to determine whether DHCS has published new reports. When we asked DHCS for perspective, it explained that counties and other stakeholders can request to be added to an email distribution list (mailing list) it uses to update stakeholders on managed care topics. It also stated that it has two advisory groups in which counties may participate, and each of these groups has an email address to which stakeholders can submit questions or concerns. However, DHCS acknowledged that it does not discuss its medical audits and other monitoring efforts in these groups unless a member requests that it do so, nor does it send such information to stakeholders on its mailing list. By improving its process for publishing its monitoring results, which it is willing to do, DHCS could better ensure that county stakeholders have the knowledge necessary to assist beneficiaries in receiving the care that they need.


To ensure that beneficiaries in Regional Model counties have adequate access to care, DHCS should identify by August 2020 the locations requiring additional providers and the types of providers required. It should also develop strategies for recruiting and retaining providers in those locations. If it requires additional funding to complete this assessment or to implement actions to address its findings, DHCS should determine the amounts it needs and request that funding from the Legislature.

To obtain assurance that health plans throughout the State exhaust all of their reasonable options to meet the access requirements before requesting alternative access standards, DHCS should immediately begin doing the following:

To ensure that it promptly and sufficiently notifies counties and other stakeholders about health plans’ quality of care deficiencies, DHCS should immediately do the following:

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Chapter 2


Chapter Summary

Over the course of the past seven years, DHCS has not adequately engaged with the Regional Model counties regarding their managed care model and contracted health plans. Specifically, before the 2013 transition, DHCS did not actively educate the rural expansion counties about the options available to them. Further, even when these counties sought to create or join a COHS, it did not assist them. DHCS’ lack of engagement with the counties continued well after the transition occurred. For example, it did not seek feedback from the Regional Model counties regarding their satisfaction with Health & Wellness’s performance before it extended its contract with the health plan.

However, DHCS could now take steps to begin acting on counties’ preferences and feedback. Since the completion of the rural expansion in 2013, a number of counties have expressed the desire to leave the Regional Model and instead create or join a COHS. DHCS’ current agreements with the Regional Model health plans make such a change difficult until 2023, but at that time, transitioning Regional Model counties to a COHS will be a viable option. Because creating a COHS would require the counties and DHCS to complete several time-consuming activities, such as establishing a provider network, starting the process now would better enable the counties and DHCS to complete these activities before the current health plan contracts expire and ensure continuity of care for the counties’ beneficiaries. By assisting the counties in making such a change, DHCS could better ensure that beneficiaries receive adequate access to care.

DHCS Did Not Adequately Educate and Assist Rural Expansion Counties During Their Transition to Managed Care

As the agency responsible for overseeing the effective delivery of health care to Medi‑Cal beneficiaries throughout the State, DHCS should have ensured that before the rural expansion counties transitioned to managed care, it proactively educated them on the available managed care options so that they could select a model that would best serve their needs. Instead, the counties selected their own models without receiving sufficient guidance from DHCS. Several county representatives we interviewed stated that they were unclear about their managed care options at the time of the rural expansion transition. In addition, even when counties determined that they wanted to join or create a COHS, DHCS did not assist them in exploring that option.

DHCS Did Not Adequately Inform and Educate Rural Expansion Counties on Their Managed Care Options

DHCS did not actively collaborate with the rural expansion counties before their transition to managed care to inform them of their options, to identify any potential concerns they should consider, or to confirm that they understood the transition process. According to the special projects manager of the DHCS director’s office (special projects manager), who formerly served as the managed care chief, DHCS representatives had several conversations with county representatives and providers, such as hospitals, that approached it with questions about managed care. For example, some counties asked DHCS about joining Partnership, and DHCS informed them of the steps they would need to take, including seeking federal approval. Nevertheless, because DHCS relied on the counties to select their own models, we expected it to have provided them with adequate information to ensure that they made informed decisions. That type of involvement likely would have helped ensure the overall success of the transition.

State law required DHCS to solicit feedback from relevant managed care stakeholders such as beneficiaries, providers, and health plans regarding their perspectives on the models that would be most suitable for the 28 rural expansion counties. During the rural expansion, DHCS held open meetings to solicit feedback from stakeholders, but it did not conduct outreach that specifically targeted the counties. Because counties are able to create COHS Models and local initiatives in a Two‑Plan Model, we expected DHCS to have considered them relevant stakeholders and to have sought their feedback. However, DHCS’ meetings did not address topics of specific relevance to counties, such as the steps a county would need to take to create a COHS Model. According to the special projects manager, DHCS believes it addressed its responsibility to inform stakeholders, including counties, about the rural expansion transition by facilitating these meetings and by being willing to address concerns stakeholders brought to its attention.

However, we question the effectiveness of this approach given that many counties told us they were unclear about their managed care options at the time of the transition. Representatives from several Regional Model counties stated that their counties had not fully understood the options that were available to them, the type of assistance DHCS was willing to provide them, or the steps they needed to take to establish or join a managed care model. Consequently, those counties did not take specific action to join or create another model and instead deferred to DHCS, which placed them in the Regional Model.

Neither DHCS’ chief deputy director—who was not involved in communications with the counties during the time of the rural expansion—nor its special projects manager could recall whether DHCS actively approached and educated the rural expansion counties beyond the transition meetings that it held for interested stakeholders. However, the special projects manager acknowledged that DHCS did not prepare informational material for stakeholders to explain the available managed care options, the steps the counties would need to take to act on those options, or the resources DHCS could offer to assist with the transition. Further, neither the chief deputy director nor the special projects manager recalled whether DHCS advised the counties on how to evaluate their demographics to determine whether particular models might be more effective in serving their beneficiaries. They also could not recall whether DHCS allocated staff resources, such as an assigned group of staff members, to monitor the progress of the counties during the transition and to serve as a resource for them. We expected DHCS to have taken some or all of these actions to ensure that the counties were well informed to select their own managed care models.

DHCS Did Not Assist Rural Expansion Counties That Wanted to Create or Join a COHS

Despite the questionable effectiveness of DHCS’ approach to inform counties of their managed care model options, many of the rural expansion counties attempted to create or join a COHS or local initiative, as we discuss in the Introduction. However, four of the Regional Model counties were unsuccessful in their attempts. Three of these four counties informed us that they attempted to join Partnership by discussing with Partnership representatives the viability of having that health plan serve their Medi‑Cal beneficiaries. One county indicated that it also passed a county board resolution affirming its support of Partnership’s expansion into the county. Representatives of the three counties explained that Partnership ultimately rejected the counties’ proposals because it had reached its capacity of additional counties it could accept. The other county attempted to join another COHS, the Central California Alliance for Health (Central Alliance). According to a county representative, Central Alliance indicated that it would not be able to accept the county because it would have been financially prohibitive for it to do so.

Most of the eight rural expansion counties that successfully joined Partnership in 2013 received assistance from an external resource, which better prepared them to join a COHS. Several of these counties participated in stakeholder meetings facilitated by Health Alliance of Northern California (Health Alliance), a network of nonprofit community health clinics and health centers. The meetings informed these counties about their managed care model options, including the locations of the current COHS they could seek to join. Health Alliance recruited Partnership to attend the meetings. A Health Alliance representative informed us that Health Alliance also coordinated with the counties to obtain declarations from their boards of supervisors that demonstrated their desire to receive Medi‑Cal services through Partnership. At least two counties then contacted their respective state legislators, who encouraged DHCS to allow the counties to join Partnership. DHCS subsequently approved these counties’ requests to join Partnership.

DHCS did not provide the type of assistance that Health Alliance provided because it did not believe that doing so was part of its role. According to the chief deputy director, DHCS expected counties that were interested in joining a COHS to reach out directly to that COHS to determine whether it was interested in providing services in the county. Further, the special projects manager explained that the COHS would have needed to consider whether it was able to establish or expand its provider network into the counties. In other words, because DHCS believed that the counties and health plans should have taken the initiative to work together, it did not attempt to facilitate or encourage any communication among them. However, we expected DHCS—like Health Alliance—to have provided assistance to the counties to ensure that they were well positioned to work with the health plans to provide the best service to their beneficiaries.

In addition, if DHCS had made information about the transition available to counties sooner, more counties might have been able to select the health plans they determined would best serve their beneficiaries. A representative from one of the Regional Model counties told us that her county became interested in joining Partnership too late in the managed care transition process, after Partnership already reached its capacity. By that time, the county was not able to create its own COHS or establish a multicounty COHS with other counties. According to DHCS’ records, it held its first stakeholder meeting to inform Regional Model counties of the transition to managed care in July 2012—only seven months before it awarded the contracts to Anthem and Health & Wellness in February 2013. We question the sufficiency of this seven‑month period to allow counties to explore the option of joining a health plan or creating an alternate managed care model, especially without informational assistance from DHCS.

Because DHCS is the entity responsible for administering the Medi‑Cal program, we believe that it was in the best position to provide assistance to counties that wanted to create a COHS. We expected DHCS to have informed the counties about the specific actions required to create a COHS and to provide assistance to those counties that did not have the resources to perform such actions. For example, two Regional Model counties told us they did not explore the option of creating a COHS at the time of the transition because they believed they did not have the necessary financial resources or knowledge. Had DHCS been proactive in offering assistance, the counties might now have managed care models that are more effective at providing services to their beneficiaries.

The chief deputy director explained that providing such assistance to counties would not have been possible in 2013 because DHCS did not have sufficient financial resources at that time. She also stated that if DHCS were to take on the responsibility of providing financial assistance to counties that want to be in a different managed care model, it would need additional funding from the State. We discuss this possibility in more detail below.

DHCS Extended Its Contracts With the Regional Model Health Plans Without Seeking Input From the Counties

State law allows DHCS to enter into contracts with one or more health plans to provide managed health care services to Medi‑Cal beneficiaries in the rural expansion counties. In addition, DHCS has the exclusive authority to establish rates, terms, and conditions of managed care plan contracts and subsequent amendments, although these elements are subject to federal approval. Although state law required DHCS to request stakeholder feedback as part of the rural expansion counties’ transition to managed care in 2013, it does not require DHCS to request feedback from stakeholders, including counties, before extending its contracts with the Regional Model health plans. However, we believe that before taking such an action, DHCS should request the counties’ feedback. Otherwise, it may miss opportunities to gain important insight from the counties on whether the health plans have been effectively serving beneficiaries.

In 2013 DHCS established five‑year contracts with Anthem and Health & Wellness to provide services in the Regional Model counties through October 2018. In November 2018, DHCS extended its contract with Health & Wellness through a provision that allowed it the option to extend the terms in one‑year increments up to four additional years. DHCS initially exercised the option to extend the contract through June 2019 and extended it again through June 2020 without seeking feedback from counties about their satisfaction with the health plan’s performance. According to the managed care chief, DHCS extended the contract because of this provision and because it did not identify any concerns with Health & Wellness that warranted terminating that contract.

Although DHCS does not have a formal internal review process for determining whether to extend a contract, it stated that it considers health plans’ performance when deciding whether to extend their contracts and would not do so if it identified significant issues. DHCS asserted that it continually monitors health plans’ performance through various methods, including but not limited to its medical audits and its review of HEDIS measures. DHCS also stated that it did not request stakeholder feedback before extending the contract, citing the absence of such a requirement and the fact that DHCS had received feedback from stakeholders when it first solicited proposals for the rural expansion counties in 2012. However, we question the timeliness and relevance of that feedback, given that it occurred before DHCS had even entered into a contract with Health & Wellness. We expected that each time DHCS extended Health & Wellness’ contract, it would request feedback from stakeholders, including counties, to gain insight regarding the health plan’s performance and the counties’ desire to continue in the Regional Model.

DHCS also extended Anthem’s contract without seeking feedback from stakeholders although it did so under other unique circumstances for which feedback would not have been relevant. In 2014 just one year after executing the original contract, DHCS agreed to a settlement with Anthem that extended its contracts for five additional years in all of the counties in which Anthem provided Medi‑Cal services, including the Regional Model counties. According to DHCS, the settlement was the result of several lawsuits Anthem filed against DHCS regarding rates that DHCS paid it to provide Medi‑Cal services. Because of the settlement, the Regional Model counties are obligated to remain in that model and have Anthem serve as one of their health plans through October 2023.

Nevertheless, it appears that DHCS did not inform counties of this extension until long after it was executed. DHCS’ current management were unclear about the extent of any discussions that their predecessors had with counties before extending the contract. However, according to representatives of several Regional Model counties, DHCS did not inform them of the extension at the time it occurred. Some of these representatives informed us that they had multiple meetings with DHCS’ executive staff in 2017 and early 2018 to discuss the managed care model options that were available to them after DHCS’ contracts with Anthem and Health & Wellness expired. According to some of these counties, DHCS informed them during those meetings that it had extended Anthem’s contract through 2023 and that it would not be able to remove them from that contract because it would incur significant financial penalties.

DHCS announced on its website that it will initiate a new request for proposals (RFP) that it anticipates releasing in 2020 for commercial managed care health plans throughout the State that include the Regional Model counties. It plans to place all of its commercial managed care health plan contracts up for bid in 2020, including Anthem’s and Health & Wellness’s Regional Model contracts. According to the chief deputy director, if the Regional Model counties want to join or create a COHS, they will need to begin working on the transition while DHCS’ contracts with Anthem and Health & Wellness are still in place, and they will need to inform DHCS before it issues the RFP. DHCS also identified January 2024 as the potential implementation date for the Regional Model contracts. However, that implementation date is subject to change, based on the health plans’ ability to provide services. According to DHCS, the four‑year period for implementation is based on the amount of time needed for it to evaluate and score proposals and to ensure that the selected health plans complete all required plan readiness activities. Although DHCS indicated it is not requesting feedback from stakeholders on this RFP because the stakeholders in those affected counties already have experience with managed care, it is willing to accept any public comments it receives after it issues the request.

The COHS Model Is a Viable Option for the Regional Model Counties That Could Ensure That Its Beneficiaries Receive Better Access to Care

As we discuss in Chapter 1, the majority of the providers that contract with the Regional Model health plans contract with only one of the health plans but not both. Because the COHS Model consists of a single health plan that a county directly oversees, its structure might facilitate better access to care for Regional Model beneficiaries because they could access all of its contracted providers. With the assistance of DHCS, many Regional Model counties could establish a multicounty COHS that likely would more effectively serve their beneficiaries. However, any formal change could likely not occur until the contracts with the two existing Regional Model health plans expire.

The COHS Model May Provide Better Access to Care for the Beneficiaries in the Regional Model Counties

As we discuss in Chapter 1, the Regional Model’s use of two health plans that must each establish adequate provider networks has negatively affected beneficiaries’ access to care. The majority of providers in the Regional Model contract with either of the Regional Model health plans but not both, meaning that some beneficiaries may have to travel hundreds of miles to receive care from in‑network providers. In contrast, one of the defining characteristics of the COHS Model is that it consists of a single health plan that provides services to its beneficiaries. By implementing a COHS in the Regional Model counties, all of the beneficiaries in those counties would have access to all of the providers in that model. DHCS indicated that it is not aware of any evaluation that has concluded that a particular managed care model is more effective at providing access to care than another model. However, the poor access conditions we identified in the Regional Model counties led us to conclude that DHCS could benefit from performing such an evaluation to determine whether a COHS would improve access to care for those beneficiaries.

A COHS also can dedicate a greater portion of its financial resources to recruiting Medi‑Cal providers to rural locations in which it operates that do not currently have enough such providers. A COHS is a nonprofit organization with a governing board that is largely composed of officials of the counties they serve. Because of its nonprofit status, a COHS does not dedicate a portion of the capitation payments it receives to corporate shareholders in the same way that Anthem and Health & Wellness do. Consequently, a COHS could have more flexibility than a commercial health plan to commit its resources to improving provider availability.

Additionally, because a COHS’s board is composed largely of officials of the counties that it serves, these county officials have influence in directing the organization to dedicate its resources to their counties’ greatest needs, including recruiting providers. According to Partnership, its board directed the organization to prioritize recruiting for providers to fill service gaps in its counties. Partnership asserts it has since committed significant resources to recruiting new providers for those counties and retaining existing providers.

Establishing a COHS Is a Viable Option for the Regional Model Counties

Since the completion of the rural expansion transition in 2013, at least seven counties have expressed to DHCS their interest in either switching to a COHS Model or in learning more about doing so. We spoke with representatives of these and other counties in the Regional Model about their experiences with the rural expansion transition, their current service delivery, and their perspectives on their future involvement with managed care. Several counties identified potential benefits of the COHS Model that they do not have in the Regional Model. For example, representatives from some counties believe that the direct county oversight of a COHS can lead to the health plan’s implementation of programs that address the counties’ specific needs. When we spoke to Partnership, it explained that it has implemented programs to assist with the opioid epidemic in response to concerns from its counties.

DHCS’ settlement with Anthem and its contract with Health & Wellness would likely preclude the counties from considering other models until those contracts expire in 2023 and 2020, respectively. Thereafter, the Regional Model counties could consider creating or joining a COHS. Federal regulations generally require that states mandating that Medicaid beneficiaries must enroll in a managed care health plan must give those beneficiaries a choice of at least two plans. However, federal regulations allow an exception for COHS Models if the COHS offers its beneficiaries a choice of at least two primary care providers.

To create a COHS that would serve multiple counties in the Regional Model, those counties would need to establish the COHS’s administrative structure and provider network. For example, the counties would need to create a special commission to negotiate the contract and arrange for the provision of health care services. The counties would also need to hire personnel, procure computer systems, and establish contracts with providers, which all have associated costs. Because DHCS cannot issue health plan capitation payments until a COHS begins serving Medi‑Cal beneficiaries, the COHS would not have those resources available to fund its start‑up costs. Given that some of the Regional Model counties may not have sufficient staff or financial resources to fund the start‑up costs of a COHS, it would seem reasonable for DHCS to provide assistance to the counties to help create the entity and hire core personnel. Further, for this same reason, it may be more cost‑effective for the Regional Model counties to create a multicounty COHS for the region rather than one or more of them creating a county‑specific COHS.

Although DHCS has yet to provide any such assistance to counties that currently desire to create a COHS, the chief deputy director stated that DHCS would need additional funding before it could provide assistance to counties. Similarly, DHCS indicated it does not provide financial resources to new health plans for start‑up costs and would need to seek funding from the Legislature to do so. However, without DHCS’ assistance, small and rural counties may not be able to develop the infrastructure required to change their managed care models.

Because DHCS’ current staff do not have experience with establishing a COHS, we interviewed a representative of the State’s most recently established COHS, Gold Coast Health Plan (Gold Coast), about the process Ventura County used to establish it in 2011. According to the representative, the formation of Gold Coast required Ventura County to hire staff to administer the health plan. Gold Coast then contracted with external vendors to perform some of its administrative functions, such as operating its claims and encounter data computer systems. Gold Coast obtained a portion of its start-up funding from one of its vendors. Gold Coast estimated that creating and staffing the COHS cost about $15 million.

In addition, before the Regional Model counties could begin operating a new COHS, both federal regulations and state law require DHCS to evaluate whether the COHS is adequately prepared to provide services to beneficiaries. That evaluation would entail reviewing the health plan’s provider network and its procedures to monitor and improve quality of care.

The Cost to Deliver Managed Care Depends on the Specific Needs of the Beneficiary Population Being Served

To evaluate whether the costs of delivering Medi‑Cal services using a COHS in the Regional Model counties would differ from the current costs of delivering those services, we reviewed DHCS’ capitation payments and other associated costs for Partnership counties and for the Regional Model counties. DHCS pays monthly capitation payments to health plans to cover services that DHCS has contractually required the health plans to provide to beneficiaries. DHCS groups eligible beneficiaries into 10 aid categories, each of which consists of individuals who have similar health risk traits. It then pays different capitation payments depending on the aid category. For example, DHCS would pay a different capitation payment for a beneficiary in the breast and cervical cancer aid category than for a beneficiary in the family and adult aid category. DHCS provides certain services to beneficiaries even though it does not require some health plans to include these services in their contracts. DHCS pays providers directly for these services, which we refer to as noncapitated services.

As Table 5 shows, DHCS spent more per beneficiary per month from fiscal years 2013–14 through 2016–17 to deliver services to Partnership’s beneficiaries than to the Regional Model beneficiaries. However, DHCS indicated that the overall average per‑member per‑month cost of providing services to Partnership beneficiaries is not a reasonable representation of how much it would cost DHCS to provide services to beneficiaries in the Regional Model counties through a COHS. The research and analytic studies chief (research chief) explained that the differences in the overall average per‑member per‑month cost for capitation payments between the Regional Model and Partnership was primarily driven by the variation in enrollment patterns between the model types during this period. The research chief stated that Partnership’s higher overall average per‑member per‑month cost is attributable to its counties having enrolled a greater proportion of beneficiaries in high aid categories than the Regional Model counties enrolled. For example, DHCS determined that in fiscal year 2013–14, about 13 percent of Partnership’s capitation payments were for beneficiaries in one of its disabled aid categories, while only 1 percent of the Regional Model counties’ payments were for such beneficiaries.

Table 5
DHCS Spent More per Member per Month for Partnership’s Beneficiaries Than for the Regional Model’s Beneficiaries

2013–14 Capitated $409 $266
Noncapitated* 231 88
Totals  $640 $354
2014–15 Capitated $428 $364
Noncapitated* 195 113
Totals $623 $477
2015–16 Capitated $365 $315
Noncapitated* 201 129
Totals  $566 $444
2016–17 Capitated $318 $308
Noncapitated* 210 141
Totals  $528 $449

Source: Analysis of DHCS’ Medi-Cal expenditures from fiscal years 2013–14 through 2016–17.

Note: According to DHCS, neither capitation payments nor noncapitated services costs include certain supplemental payments, Medicare premiums, pharmacy rebates, or settlements.

* Noncapitated services are those that DHCS does not require health plans to provide to beneficiaries in their benefits packages. Instead, DHCS pays providers directly for the services when billed by the providers.

According to the research chief, another factor contributing to the difference between Partnership’s costs and Regional Model health plans’ costs is their beneficiaries’ utilization of noncapitated services. For example, DHCS paid about $27 more per member per month in fiscal year 2016–17 for Partnership’s beneficiaries to receive in‑home supportive services, which are noncapitated, than it did for the Regional Model beneficiaries. The research chief informed us that like capitation payments, costs relating to noncapitated services depend on the number of beneficiaries in a health plan who qualify to receive the services and the degree of assistance that each beneficiary needs. If a health plan has more beneficiaries that require noncapitated services, DHCS will pay a higher overall average per‑member per‑month cost for those beneficiaries. Consequently, the costs that DHCS incurs for health plans to deliver care to their beneficiaries is based on the specific needs of those beneficiaries whom the health plans serve.


To ensure that all counties are aware of the managed care model options available to them and of the steps necessary to implement those models, DHCS should provide by December 2019 information to all counties that clearly defines each managed care model and the steps and legal requirements needed to establish each model.

To ensure that it makes informed decisions regarding the extension or renewal of its contracts with managed care health plans, DHCS should immediately begin the practice of requesting annual feedback from the counties that the health plans serve and of using that feedback in its decision‑making process.

To ensure that beneficiaries in the Regional Model counties have reasonable access to care, DHCS should do the following by June 2020:

We conducted this audit under the authority vested in the California State Auditor by Government Code 8543 et seq. and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Respectfully submitted,

California State Auditor

Date: August 6, 2019

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