December 18, 2019 Press Release

Wednesday, December 18, 2019

DMHC Fines 12 Health Plans $1.9 Million for Improperly Denying Care to Enrollees

Plans’ Contracted Medical Group Illegally Restricted Access to Care, Falsified Documents

Today, the California Department of Managed Health Care (DMHC) announced enforcement action against a dozen health plans, including fines totaling $1.9 million, for lack of oversight of a contracted medical group which led to improper denials and delays of enrollees’ care. Under the law, health plans are responsible for compliance even when they contract out certain functions.

“The DMHC takes this very seriously as the health plans’ lack of oversight put enrollees at risk,” said DMHC Director Shelley Rouillard. “The health plans must improve their oversight to make sure their enrollees have proper access to care and their contractors follow the law. The DMHC will monitor the health plans’ corrective actions and will continue to take appropriate action to protect enrollees.”

Following whistleblower complaints in October 2017, the DMHC Office of Enforcement opened an investigation into Employee Health Systems Medical Group (EHS), the medical group the health plans contracted with to deliver care primarily to Medi-Cal managed care enrollees. EHS sub-contracted the entirety of its authority to provide care to over 550,000 health plan enrollees to a management services organization called SynerMed. EHS and SynerMed operated essentially as a single enterprise, sharing many executive officers and directors, and with SynerMed personnel conducting all of EHS’s health plan contracted duties, including managing enrollee requests for health care services, processing and paying provider medical claims and performing other contractual duties.

The DMHC’s investigation found SynerMed, and therefore EHS and the health plans, illegally restricted enrollees’ access to health care services through profit-motivated schemes. This includes:

• Delayed Care for High-Cost Enrollees: SynerMed flagged enrollee requests for treatment of expensive conditions and diverted them to a special team whose goal was to pressure the enrollees to transfer to a different medical group. Records reveal that the program ushered or attempted to usher more than 5,000 high-cost enrollees out of EHS between January 2015 and May 2017. The process of convincing enrollees to transfer frequently spanned weeks, during which time SynerMed unlawfully put a hold on the enrollees’ requests for care. The Department identified one instance where the authorization involving a kidney transplant was delayed for over 100 days.
• Restricted Access to Costly Specialists: SynerMed conducted illegal economic profiling which restricted access to certain specialist providers. Economic profiling includes any evaluation of a provider based on the economic costs or utilization of services associated with the authorization of medical care. For economic profiling to be lawful, the health plan must disclose it to the DMHC and attest it does not prevent medical decisions made by qualified medical providers, unhindered by fiscal and administrative management. Without notifying the health plans or the DMHC, SynerMed defrauded enrollees by secretly concealing costly specialists from EHS’s network. When doctors tried to refer their patients to one of these suppressed doctors, they found that they could choose only from a smaller list of doctors instead of the full list of doctors that should have been available.
• Falsified Documents: SynerMed systemically generated fake documents for audits to make it appear as though it had sent denial or modification notifications to enrollees when it had not. The DMHC found SynerMed failed to send thousands of these notification letters to enrollees.

The DMHC issued a cease and desist order in December 2017 to health plans contracting with EHS directing them to terminate their contract because of the immediate potential for enrollee harm specifically due to improper restrictions placed on access to providers.

“I encourage any health plan enrollee who is having difficulty accessing care to contact their health plan directly for assistance. If the health plan does not resolve the issue, then contact the DMHC Help Center at www.HealthHelp.ca.gov or 1-888-466-2219,” Director Rouillard added.

The DMHC’s oversight is over the health plans and ultimately it is the health plan’s responsibility to ensure their contractors and delegates comply with the law. The DMHC reached settlement agreements with the 12 health plans to address these violations, including fines and corrective action plans. The health plans have agreed to implement corrective action plans, which include conducting outreach to enrollees that may have been impacted, and improving oversight by implementing live and on-site audits, conducting systems integrity testing, and using other tools designed to protect against fraudulent activity. The plans must also prevent any illegal use of economic profiling and ensure employees of contracted entities have appropriate outlets to report internal fraud and abuse.

The Department took several factors into consideration in determining the health plan fines, including the nature, scope and gravity of the violations, the plans’ enrollment assigned to EHS, and the plans’ cooperation with the Department and corrective actions taken:

About DMHC:

The DMHC protects the health care rights of more than 26 million Californians and ensures a stable health care delivery system. The DMHC Help Center has assisted approximately 2.4 million Californians to resolve complaints and issues with their health plan. The DMHC Help Center provides assistance in all languages and all services are free. For more information visit www.HealthHelp.ca.gov or call 1-888-466-2219.