California auditor finds DHCS is failing beneficiaries in 18 rural counties

California State Auditor Elaine Howle released a report Tuesday, finding that the state Department of Health Care Services (DHCS) is failing to ensure accessible care to some rural Medi-Cal beneficiaries.

When first established, Medi-Cal  operated exclusively as a fee-for-service system. California then began to transition Medi-Cal to a managed care model because the state believed managed care would improve care coordination and case management for beneficiaries. By 2012, 30 counties had transitioned over. In 2012, state law instructed DHCS to transition the remaining 28 fee-for-service counties. This was referred to as the rural expansion.


Get the latest state-specific policy intelligence for the health care sector delivered to your inbox.


Eight of the twenty-eight counties developed their own non-profit managed care plan, called Partnership Health Plan of California. Eighteen counties were grouped into a managed care model, referred to as the Regional Model. Under the Partnership, the beneficiaries receive services from a single, nonprofit health plan with county oversight. Under the Regional Model, beneficiaries select between one of two commercial health plans, Anthem and California Health and Wellness. The report focuses largely on these 26 counties.

Both the Regional Model and the Partnership failed a number of performance metrics, although both improved over the past few years. However, the Partnership has been much better than the Regional Model at providing access to care, according to the report.

The 67-page report found that DHCS failed to provide adequate access to and quality of care to Medi-Cal beneficiaries in the 18 counties of the Regional Model. In particular, the report found that beneficiaries in the Regional Model counties had to travel excessive distances to receive care, sometimes 300 miles.

State law requires that distances cannot exceed 10 to 60 miles, depending on the type of care. The report found that DHCS failed to enforce distance requirements. Health plans have the ability to request exceptions to the distance rule; however, DHCS approved all of the exemptions without reviewing whether the health plan had exhausted all other options.

Because DHCS granted every exemption, the health plans in the Regional Model stayed in compliance. Had DHCS initiated some corrective action plans (CAPs), health plans would have been motivated to improve provider networks. In the text of the report, Howle states,

“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.”

The report also found that DHCS failed to provide proper assistance and education to the counties in the Regional Model. This led to counties failing to implement a system of care that best meets the needs of rural beneficiaries. The report stated,

“Several 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.”

The major recommendations from this report include a more stringent exception policy and process and establishing county oversight within the Regional Model counties. They recommend transitioning the Regional Model over to a county-organized health system (COHS), similar to the Partnership model.

The COHS model uses one health plan (whereas the Regional Model uses two), meaning, beneficiaries have access to all providers accepting Medi-Cal in that county. Under the Regional Model, most providers choose to accept one plan or the other, but not both. This limits access significantly, increasing the travel times to non-compliant levels, as the report shows.

“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.”

DHCS plans to establish new contracts with the managed care plans in the Regional model. Howle’s report recommends that DHCS use this renegotiation period to transition to a COHS model. In a response to the 13 recommendations in the report, Director of DHCS, Jennifer Kent stated,

“DHCS agrees with nine of the recommendations, disagrees with three of the recommendations, and believes they are already in compliance with the remaining recommendation. DHCS has prepared corrective action plans to implement the nine recommendations we agree with. DHCS appreciates the work performed by the CSA and the opportunity to respond to the findings.”

You can find all recommendations and DHCS’s response to them here.