Report 2011-104 All Recommendation Responses

Report 2011-104: Medi-Cal Managed Care Program: The Departments of Managed Health Care and Health Care Services Could Improve Their Oversight of Local Initiatives Participating in the Medi-Cal Two-Plan Model (Release Date: December 2011)

Recommendation #1 To: Managed Health Care, Department of

To monitor local initiatives' financial viability and compliance with the Knox-Keene Act requirements, Managed Health Care should develop a formal policy to ensure that it reviews financial reports in a timely manner, and that administrative expenses are correctly categorized.

Agency Response*

Managed Health Care provided us the policies and procedures that it developed and implemented to ensure staff conduct thorough and timely financial reviews. In April 2012 Managed Health Care trained staff on these policies and procedures, including reviews of administrative expenses to ensure correct categorization. Further, Managed Health Care made changes to its financial filing system to help monitor that staff are following the new policies and procedures. (See 2013-406, p. 77)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #2 To: Health Care Services, Department of

To ensure that all four financial soundness elements included in Health Care Services' contract are being reviewed, it should conduct financial reviews consistently and update its review tool to include working capital.

Agency Response*

Health Care Services revised its financial review tools to include all four financial soundness elements and in February 2012 it approved a written policy that addressed the consistency of the financial reviews. (See 2013-406, p. 78)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #3 To: Health Care Services, Department of

Health Care Services should develop a formal policy to ensure that it conducts financial reviews in a timely manner.

Agency Response*

Health Care Services approved a written policy in February 2012 that addressed the timeliness of the financial reviews. (See 2013-406, p. 78)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #4 To: Health Care Services, Department of

To make its financial solvency reviews more efficient and reduce the risk of errors, Health Care Services should coordinate with Managed Health Care when analyzing local initiatives' consolidated financial reports.

Agency Response*

On November 13, 2013, the Capitated Rates Development Division (CRDD) revised current policies and procedures pertaining to the monthly and quarterly financial analyses. CRDD will utilize the financial information available on the website of the Department of Managed Health Care (DMHC) as the primary source of information when completing CRDD's monthly and quarterly financial analyses. These changes will effectively eliminate the recreation of financial ratios by CRDD which has already been computed and provided through the DMHC financial website.

  • Response Type†: Annual Follow Up
  • Completion Date: November 2013
  • Response Date: November 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Health Care Services implemented a policy in February 2012 to obtain Managed Health Care's financial information from its Web site and to use this information in its newly developed automated system to calculate various financial ratios. However, under this new policy Health Care Services continues to recreate the financial ratios that Managed Health Care's automated system currently provides. (See 2013-406, p. 78)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Pending


Recommendation #5 To: Managed Health Care, Department of

To ensure that local initiatives implement corrective action plans, Managed Health Care should devise a more effective process to track, monitor, and review the status of local initiatives' corrective actions as they relate to financial examination requirements.

Agency Response*

Managed Health Care developed and implemented a corrective action plan tracking feature in its database to allow for the ready identification of all of the local initiatives' corrective action plans and their status. Also, in October 2012, Managed Health Care provided training to its staff on the new corrective action plan policies and procedures, as well as on the new tracking feature in its database. (See 2013-406, p. 78)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #6 To: Health Care Services, Department of

Health Care Services should ensure that it performs annual medical audits of local initiatives as required by law.

Agency Response*

MRB has fully implemented the annual medical audits for each of the previously existing 21 Medi-Cal managed care plans. A 22nd plan opened and will be audited in the subsequent year as well. DHCS is fully integrated with the Department of Managed Health Care (DMHC) to coordinate and conduct joint audits. As the DMHC is on a triennial cycle, approximately every third MRB audit is a joint endeavor. DHCS has published the reports on the Managed Care Quality and Monitoring Division's website.

  • Response Type†: Annual Follow Up
  • Completion Date: June 2015
  • Response Date: October 2016

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

MRB has fully implemented the annual medical audits for each of the previously existing 21 Medi-Cal managed care plans. A 22nd plan opened and will be audited in the subsequent year as well. DHCS is fully integrated with the Department of Managed Health Care (DMHC) to coordinate and conduct joint audits. As the DMHC is on a triennial cycle, approximately every third MRB audit is a joint endeavor. DHCS has published the reports on the Managed Care Quality and Monitoring Division's website.

  • Response Type†: Annual Follow Up
  • Completion Date: March 2015
  • Response Date: October 2015

California State Auditor's Assessment of Status: Partially Implemented

Although some medical audits have been conducted, Health Care Services has yet to conduct annual medical audits of all Medi-Cal managed care plans. Health Care Services stated it commenced the annual medical audits of all Medi-Cal managed care plans in fiscal year 2015-16. Therefore, we assessed this recommendation as partially implemented until Health Care Services can demonstrate it has performed annual medical audits of local initiatives as required by law.

  • Auditee did not substantiate its claim of full implementation

Agency Response*

A&I, MRB is on track with its overall implementation plan which includes classroom training, field mentoring, ongoing Subject Matter Expert (SME) consultation for audit staff who perform medical audits of contracting health plans. As of May 2014, seven audit teams completed the classroom training; and by December 2014, those teams will have performed an audit under guidance from experienced managers and SMEs. Internal quality review of completed reports is conducted by senior management to assure report reliability and consistency.

Bi-monthly, Joint Audit meetings with DHCS, Medi-Cal Managed Care Division (MMCD), A&I, MRB and the DMHC, Plan Surveys Division serve to coordinate audit/survey schedules, obtain MMCD Corrective Action Plan (CAP) status reports, and policy & legislative updates.

Joint DHCS and DMHC on-site engagements are coordinated in accordance with Welfare & Institution Section 14457; the current DMHC focus is on health plan implementation of SPD; and starting in 2015, the CalMediConnect implementation.

Whenever possible, coordination of on-site schedules is achieved between DHCS & DMHC. However, two scheduled audits were postponed due to the financial circumstances of the health plans (one Local Initiative (LI) and one County Organized Health System (COHS)).

From September 2013 through to July 2014, an additional eight health plans (four LIs, three commercial plans, and one COHS) were audited

Upon completion of the CAPs, the issued Audit Reports, completed CAPs and corresponding MMCD Close out Letters are posted to the MMCD website's Monitoring page.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: Fall 2015
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

The Medical Review Branch (MRB) is ramping up to full implementation of the annual medical audits. There are currently four of seven audit teams trained and functioning. We anticipate all seven teams functional by 2014 and have the capacity to conduct the annual audits for all Medi-Cal managed care plans. The Department of Managed Health Care (DMHC) reviews all managed care plans every three years. The MRB teams work with the DMHC teams in joint efforts on the Medi-Cal managed care plans.

In 2013, of the 10 operational Local Initiatives, 3 (Contra Costa Health Plan, CalViva, and Kern Family Health Plan) were audited. By the end of 2013 MRB, MRB will have audited 4 of the 10 operational Local Initiatives. An audit of the Tulare County LI which is operated by Anthem Blue Cross will start mid-November.

In 2012, 1 GMC Plan, Community Health Group, and 1 COHS, Gold Coast Health Plan were audited.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 2014
  • Response Date: September 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Health Care Services stated it is working with Managed Health Care to coordinate its efforts related to the medical audits. To ensure the work is leveraged, Health Care Services prepared a crosswalk of the departments' respective statutory and regulatory audit requirements. In addition, Health Care Services plans to phase-in the completion of annual medical audits of Medi-Cal managed care plans, including the local initiatives. Health Care Services indicated it completed two medical audits by the end of 2012 and it plans to continue to increase the number of medical audits completed each year, until full implementation is achieved in 2015. Health Care Services stated that this phase-in process is needed to allow it to increase the staffing required to conduct annual medical audits of all Medi-Cal managed care plans. To maintain a visible presence with managed health care plans, Health Care Services plans to conduct two types of more limited reviews to develop an ongoing understanding of what is occurring with each managed health care plan. (See 2013-406, p. 79)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Pending


Recommendation #7 To: Managed Health Care, Department of

Managed Health Care should ensure that it obtains timely medical audits from Health Care Services. If it is unable to obtain timely medical audits from Health Care Services, it should conduct them itself.

Agency Response*

Managed Health Care has developed and implemented a written policy to track and secure copies of Health Care Services' medical audits and findings, and to the extent necessary, to timely schedule a Knox-Keene Act medical audit in the event that Health Care Services does not conduct its annual medical audit. Additionally, Managed Health Care has bi-monthly meetings with Health Care Services to coordinate Medi-Cal audit schedules, review the status of audit reports, and discuss the scope of work for future audits. Finally, Managed Health Care is working with Health Care Services to determine areas of overlap and distinction in their respective statutory and regulatory audit requirements. (See 2013-406, p. 79)

  • Response Type†: 1-Year
  • Response Date: December 2012

California State Auditor's Assessment of Status: Fully Implemented


All Recommendations in 2011-104

Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.

*Agency responses received after June 2013 are posted verbatim.


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