Past Disarray Costs CalOptima $20K

Little more than two years ago, CalOptima was in disarray – board members were trading accusations that of self-dealing, their seats were being regularly rotated, and there appeared to be a revolving door to its c-suite.

That period of disorganization led in part to the Department of Managed Care's decision to impose a $20,000 fine earlier this month against CalOptima, among the largest penalties ever levied against a county Medi-Cal managed care organization.

The fine is the first ever levied by the DMHC against CalOptima, which has about 581,000 enrollees. The DMHC issued a letter of admonishment to the health plan in 2011 when it did not provide the agency information in a timely manner, but decided not to levy a fine. 

Part of the fine was connected to what the DMHC identified as an unfair payment pattern to providers. 

Auditors discovered in late 2012 that CalOptima had paid incorrect sums to providers five times in 90 claims that were examined. That's a compliance rate of 94% – just below the mandatory threshold of 95%. It also found that CalOptima failed to correctly reimburse claims that were paid after 45 days of submission 86% of the time, which must include penalties and interest.

CalOptima spokesperson Bridget Kelly said the health plan reviewed its claims processing system “and determined the issue stemmed from human error and therefore implemented additional training and oversight processes were put in place.”

CalOptima also did not announce to the DMHC appointments of its chief executive officer, chief financial officer and trustee Michael Riley, director of the Orange County Social Service Agency in a timely fashion during the first half of 2012. State law requires communications of such appointments be made within five days. 

CalOptima named Richard Engelhard, its CFO, as acting chief executive officer, and Michael Ewing as acting CFO on April 15, 2012. The DMHC said it was not apprised of the appointments until April 26. CalOptima did issue a public statement on March 2 that Engelhard had been named acting CEO, although the exact date he assumed those duties was unclear. 

The composition of the CalOptima board and executive staff has since changed almost entirely, with numerous new appointments to both its board and its c-suite.