CalOptima’s $90,000 Mystery Payment

The chief executive officer of the recently created Covenant Health Network sent CalOptima late last month a check of more than $90,000 to reimburse the Medi-Cal managed care plan for use of its employees and office space by another organization to secure a federal grant.

CalOptima on Wednesday released a March 28 letter Richard Afable, M.D., sent to CalOptima. It was accompanied by a cashier's check for $90,391.

According to Afable's letter, which bore the letterhead of Covenant affiliate organization St. Joseph Healthcare, CalOptima “was deserving of reimbursement for contributed services.” 

The letter also made reference to the reimbursement being provided to a “coalition of Orange County-based healthcare organizations,” but did not mention specific names.

Afable, who is out of the country, could not be reached for comment this week. 

A statement issued by Deborah Proctor, the chief executive officer of St. Joseph Health System, said the payment was made “on behalf” of the Managed System of Care (MSC), a coalition of providers focused on bringing efficiencies to Orange County's safety net population. 

However, the MSC was dissolved late last year. Sources said although MSC had a balance in its bank account at the time of its dissolution, it had been “zeroed out.” It is unknown where the money went.

OneOC, another Orange County non-profit, had served as the fiscal intermediary for the MSC. Its Chief Executive Officer, Daniel McQuade, was on vacation this week and unavailable for comment. Another top OneOC official did not respond to a telephone call seeking comment.

CalOptima had sought reimbursement from two of its former board chairs, Edward Kacic, president of the Irvine Health Foundation, and Michael Stephens, former chief executive officer of Hoag Memorial Hospital Presbyterian, for their alleged use of its employees and office space while applying for federal grants on the behalf of the MSC.

CalOptima had sought $82,000 from Stephens, who served as a consultant for the MSC, and the remainder from Kacic, who sat on the MSC steering committee.

The sudden and mysterious reimbursement added to the intrigue that has surrounded CalOptima in recent months. 

The organization, which provides coverage to about 450,000 Medi-Cal and Healthy Families recipients, has seen a virtual turnover of its senior management and board of directors over the past 18 months. A report issued by the Orange County Grand Jury in January said the organization was in such turmoil that it was at risk of “implosion.”

Payers & Providers reported in February of last year that the Irvine Health Foundation would have managed one of the grants, a $9.3 million request from the Center for Medicare and Medicaid Innovation to create medical homes and other potentially money-saving initiatives for CalOptima and other Medi-Cal enrollees. It did not receive the money.

“CalOptima appreciated the goal of the Managed System of Care to improve (the) healthcare of Orange County’s most vulnerable residents but had a fiduciary requirement to seek reimbursement of related costs that were not authorized by the CalOptima Board,” a statement from the quasi-public insurer read in part. 

CalOptima also said in its statement the money came from a regional coalition. A spokesperson did not respond to a request to provide specifics.

Kacic himself expressed surprise that the money CalOptima sought had been paid.

“I am unaware of it,” he said on Wednesday. He added that many MSC members would have objected to the payment and the sentiments expressed in Afable’s letter.

Stephens did not respond to a phone call seeking comment.

Kacic and his attorney had resisted the request for payment from CalOptima, which was initially made last September following an internal compliance audit. They had maintained that they had approval from CalOptima management to perform the work.

Kacic had been appointed to the CalOptima board in 2009, and named its chairman in August 2011. He was removed as chairman last spring as part of shuffling of several board seats, and resigned from the board last summer when it appeared he would not be reappointed by the Orange County Board of Supervisors.

Sources have suggested CalOptima be repaid by providers or other healthcare players in Orange County, lest the contentious issue be allowed to fester. 

The one Orange County Supervisor who serves on the CalOptima board, Supervisor Janet Nguyen, would say only through a spokesperson that the payment had been made, and that it satisfied the fiduciary duty of the organization.

Nguyen's reticence regarding the payment is in stark contrast to her fierce criticism of the grand jury report, which had prompted her to call a press conference to rebut many of its points. The report itself had praised Kacic and Stephens for working to secure the grants, and said CalOptima's attempt to obtain reimbursement was an attempt to exact retribution from them.

Kacic suggested the payment may have come wholly from Covenant, which was created in February through the affiliation of Hoag and St. Joseph Health, which operates five hospitals in Southern California.