Summary

Audit Highlights . . .

Our audit of DHCS’ oversight of managed care in the Regional Model counties revealed the following:

» The Regional Model health plans have not provided all Medi-Cal beneficiaries with adequate access to care.

DHCS did not enforce state requirements that limit the distances health plans may direct their Medi-Cal beneficiaries to travel to receive health care—some beneficiaries were required to travel hundreds of miles to receive care.
DHCS failed to hold Regional Model Health plans accountable for improving beneficiaries’ access to care.

» Regional Model beneficiaries have generally received a lower quality of care than beneficiaries in other areas of the State.
» DHCS did not adequately educate the Regional Model counties about the options available to them regarding their transition to managed care.

It did not assist Regional Model counties that wanted to create or join a COHS, which may have provided its beneficiaries with better access to care.

Results in Brief

In 2012 state law required the Department of Health Care Services (DHCS) to transition the recipients of California Medical Assistance Program (Medi‑Cal) services (beneficiaries) in 28 fee‑for‑service counties in rural areas (rural expansion counties) to managed care. In contrast to the fee‑for‑service delivery system in which a beneficiary seeks medical care from a Medi‑Cal provider and that provider then bills the Medi‑Cal program for the individual service, in the managed care delivery system, DHCS contracts with and pays monthly rates to health plans to coordinate and administer services to beneficiaries enrolled in these plans. Eight of the 28 counties chose to join a nonprofit health plan called Partnership Health Plan of California (Partnership) that operated under county oversight, while DHCS worked with two other counties to establish their own unique models for providing health care. DHCS grouped the remaining 18 counties into a new managed care model that it called the Regional Model. DHCS then contracted with two commercial health plans—Anthem Blue Cross Partnership Plan (Anthem) and California Health & Wellness (Health & Wellness)—to deliver managed care services to the beneficiaries covered under the Regional Model. The Joint Legislative Audit Committee requested that we determine whether the Regional Model beneficiaries have received an acceptable level of care and to evaluate how that care compares to the care beneficiaries in other models have received. Acceptable level of care is not a standard term DHCS uses, so for the purposes of this audit, we have defined the term to mean adequate access to care combined with adequate quality of care. Under this definition, beneficiaries in the Regional Model have not received an acceptable level of care.

Most significantly, even though Partnership operates in comparable rural counties, the two Regional Model health plans have provided beneficiaries with worse access to care than Partnership has provided its beneficiaries. In fact, our analysis showed that the Regional Model health plans have required some beneficiaries to travel hundreds of miles to reach certain health care providers, including obstetricians, oncologists, neurologists, and pulmonologists. In many instances, these distances far exceeded the distances that Partnership required its beneficiaries to travel for similar care. For example, according to DHCS’ January 2019 provider location data, 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.

Regional Model beneficiaries had to travel such long distances in part because most of the providers that contracted with the Regional Model health plans contracted with only one of the two health plans. Consequently, a beneficiary of one plan might have to travel significantly farther for care than a beneficiary of the other plan from the same location who was seeking the same care. For example, according to DHCS’ January 2019 provider location data, a resident of Olancha in Inyo County who was seeking oncologist care would need to travel 60 miles to Ridgecrest if he were an Anthem beneficiary; however, if he were a Health & Wellness beneficiary, he would need to travel more than 150 miles to Burbank for the same care because Health & Wellness did not have a contract with the closer provider. When health plans require beneficiaries to travel this far to receive care, those beneficiaries may be unable or unwilling to do so.

In many cases, the distances that the Regional Model health plans required far exceeded the limits state law imposes, which range from 10 to 60 miles depending on the type of service. Nonetheless, DHCS did not effectively intervene when health plans did not meet these access requirements as it did when it found that health plans were not meeting quality standards. Instead, after the current distance and travel time requirements first became effective in 2018, DHCS ultimately approved all the requested exceptions to the access requirements even though it had not evaluated whether the health plans had exhausted all other reasonable options to identify providers that would meet those requirements. As a result, all the health plans—including those in the Regional Model counties—remained in compliance with state law because of those approvals even though the distances that the plans required beneficiaries to travel did not comply. If DHCS had placed health plans on corrective action plans (CAPs) pertaining to access to care instead of approving their exception requests, it might have motivated them to improve their provider networks. By establishing CAPs, DHCS could also have required the health plans to pay for out‑of‑network care for beneficiaries that did not have adequate access to care. However, by approving the health plans’ requests for exceptions to travel‑distance requirements, DHCS reduced their incentives to improve their networks and undermined the intent of the law, which is to provide beneficiaries access to care within prescribed distance limits.

In addition, the Regional Model health plans have consistently provided a lower quality of care than many other plans in the State. Specifically, from 2015 through 2018, DHCS determined that the health plans in all 28 rural expansion counties performed below a number of national minimum performance levels. Further, when the Department of Managed Health Care—which state law authorized to perform audits on behalf of DHCS—audited the rural expansion counties’ health plans from 2014 through 2016, it identified more serious deficiencies in the 18 Regional Model plans than in the health plans of the other 10 rural expansion counties. However, because DHCS has taken steps to address these types of issues, such as imposing CAPs, the quality of care in the Regional Model counties has steadily improved in recent years.

DHCS provided the counties with only limited guidance and information to assist them in 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 proactively educated the rural expansion counties on the available managed care model options before they transitioned to managed care and thus better ensured that the counties would select models that would best serve their beneficiaries’ needs. According to DHCS, the limited‑guidance approach had worked well when it transitioned other counties to managed care before 2012. However, this approach was not as effective for the rural expansion counties because many of them lacked the knowledge and resources to determine the model that would best serve their beneficiaries.

We believe that DHCS could improve the future access to managed care services of the Regional Model beneficiaries by assisting counties in transitioning from the Regional Model to a county organized health system (COHS). Partnership—the health plan that currently serves eight of the 28 rural expansion counties and has generally provided adequate access within those counties—is a COHS that non-rural expansion counties established before the rural expansion. In contrast to the Regional Model, a COHS uses a single health plan to deliver services to all of its beneficiaries. Consequently, these beneficiaries can receive care from the same network of providers unlike in the Regional Model in which the two health plans frequently contract with different providers. Further, a COHS operates under the direct influence of county officials who make up a portion of its board of commissioners. The counties are therefore better able to direct the COHS to use its resources to address the specific needs of their beneficiaries. Although many variables affect health plans’ abilities to establish provider networks that deliver acceptable access to care, a COHS might enable better access to care in the Regional Model counties.

Transitioning the Regional Model counties to a COHS will be possible after DHCS’ contract with Anthem expires in 2023. However, transitioning from the Regional Model to a multicounty COHS would require the counties to complete a number of necessary start‑up activities, including establishing a special commission, hiring administrative staff, and gaining federal approval. Because the Regional Model counties tend to have fewer resources than other counties, they will likely need DHCS’ assistance in performing these activities. If Regional Model counties wish to be in a COHS, DHCS would need to immediately begin efforts to allow for a smooth transition for these counties’ beneficiaries. By providing the counties with assistance in creating a COHS, DHCS could ensure that Regional Model beneficiaries are better able to receive the health care services that they need.

Summary of Recommendations

To obtain assurance that health plans throughout the State have exhausted all of their reasonable options to meet the access requirements before seeking exceptions, DHCS should immediately begin doing the following:

Develop written guidance that specifies the conditions under which staff should approve, deny, or contact health plans for clarification regarding their requests for exceptions.
Determine a specific minimum number of providers that health plans must attempt to contract with before requesting an exception.
Require health plans to report on their attempts to contract with providers when submitting their requests, including providing evidence of their efforts, such as the contact information for each provider with which they have attempted to contract.
Establish a process for periodically verifying the health plans’ efforts, such as contacting a sample of the listed providers and determining whether the plans attempted to contract with them.
Require health plans to authorize out‑of‑network care if they do not demonstrate they have exhausted all of their reasonable options to meet the access requirements.

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

Determine the specific causes of Anthem’s and Health & Wellness’s inabilities to provide reasonable access to care in the Regional Model counties.
Evaluate whether the structural characteristics of a COHS Model would be better suited to providing reasonable access to care in these counties and notify the counties of its conclusions. If some or all of the counties desire to transition to a COHS, DHCS should assist them in making that change after their current contracts expire.
Evaluate whether it has the financial resources to provide assistance to counties interested in establishing a COHS or other managed care model after the current Regional Model contracts expire. If DHCS does not have the required financial resources, it should seek an appropriate amount of funding from the Legislature.
Provide counties with reasonable opportunities to decide whether to change their managed care models after the expiration of their current contracts. DHCS should provide counties that choose to do so sufficient time to establish their new models before the expiration of their current agreements to ensure continuity of service.

Agency Comments

Although DHCS agreed with most of our recommendations, it disagreed with several recommendations, stating that it will not implement them.