A Southern California health plan that state Controller John Chiang said “fleeced the state” out of an estimated $300 million stands to gain hundreds of members who are losing services as a result of state budget cuts.
Chiang urged the state’s Medi-Cal agency yesterday to recover the funds before routing former Adult Day Health Care participants into the Senior Care Action Network (SCAN) Health Plan.
A Medi-Cal audit [PDF] last year found that SCAN reaped $85 million in profits off a one-year, $100 million Medi-Cal contract due to overpayments.
Chiang estimated that if the overpayments occurred since the state contract with SCAN began in 2001, the health plan earned $339 million in unjust profits while drawing funds from both Medicare and Medi-Cal to serve the same group of seniors.
The firm, based in Long Beach, operates in Los Angeles, Riverside and San Bernardino counties.
While the health plan initially called Chiang’s conclusions “untrue and unwarranted,” the company said yesterday that it is cooperating in settlement talks with the state attorney general and U.S. attorney’s office.
Meanwhile, the Department of Health Care Services, which administers Medi-Cal, is turning to the SCAN Health Plan in its transition strategy [PDF] for thousands of seniors who will no longer receive Adult Day Health Care services after Gov. Jerry Brown’s recent budget cuts and veto of a replacement program.
The department estimates that about 20 percent of the 35,000 seniors and disabled who will no longer get adult day care services will qualify for the SCAN health plan or another similar program. Enrollment in the plan will be optional for seniors, according to the Medi-Cal agency’s transition strategy plan.
The move prompted Chiang to send a letter yesterday to Toby Douglas, director of the Department of Health Care Services, urging him to resolve the financial matters. “Prior to allowing SCAN to participate in the enrollment and placement process … the Department should first take all actions necessary to ensure recovery of the overpaid amounts,” Chiang wrote.
The department estimates that about 24,500 Adult Day Health Care participants live in the SCAN service area in and around Los Angeles. More than half do not speak English, nearly 10,000 are incontinent, 5,800 have dementia and about 12,000 have a psychiatric disorder.
The transition plan calls for the $900-per-month program to be replaced by managed care plans, including SCAN, supported by the state at an estimated $60 per month, according to testimony yesterday during the Assembly Committee on Aging and Long-Term Care hearing on the health center program elimination.
Advocates for those seniors warn that the managed care plans will not be an adequate replacement for the 304 centers that seniors visited up to four days each week.
“A human disaster is about to unfold in your communities,” Lydia Missaelides, executive director of the California Association for Adult Day Services, told lawmakers during the hearing.
Stat Sens. Elaine Alquist, D-San Jose, and Alan Lowenthal, D-Long Beach, first requested that the Department of Health Care Services audit the SCAN Health Plan after receiving a report from a former SCAN employee about high profits.
Medi-Cal auditors determined that in 2007, SCAN earned $100 million from the federal Medicare program and $100 million from the Medi-Cal program to manage care for 6,430 seniors. The cost for caring for the seniors was about $103 million, leaving the firm with $96 million in profits that year. Medi-Cal auditors estimated that SCAN earned an 83 percent profit off the state-administered funds.
Controller Chiang reviewed the audit results and wrote a letter [PDF] last year to SCAN Health Plan chief executive David Schmidt, decrying the plan’s failure “to meet its contractually-obligated reporting requirements” that would have allowed the state Department of Health Care Services to spot the overpayments earlier.
Still, Chiang wrote that he is “deeply concerned” that the department “conducted no analysis of SCAN’s effectiveness before renewing a $1.44 billion contract for five years.”
In the audit report, the department said it took action to address the issues by ensuring that SCAN submits certifiable financial reports on its Medi-Cal program. Also, the department cut its payments to the health plan by 70 percent from the 2008 level, the audit shows.
The SCAN Health Plan said in a statement yesterday that "it has partnered with state and federal agencies to provide exceptional health care to more than 100,000 California seniors over the past 25 years. We take that mission and our responsibilities to our government partners and the seniors we serve very seriously."
The attorney general's office said negotiations with SCAN are ongoing; the U.S. attorney's office declined to comment on the matter.
The health plan in 2008 launched The SCAN Foundation, which has been prolific in issuing grants on elder care research to well-respected organizations, including UCLA, Georgetown University and the Brookings Institution in Washington, D.C.
According to the foundation’s 2009 tax filing, it was tapped by the state Health and Human Services Agency to help develop a statewide Alzheimer’s care plan. The organization's total expenses that year were $12.8 million. Schmidt, who served as a director for the foundation, earned $1.7 million in total compensation that year but was not paid by the foundation, according to tax records.
The SCAN Health Plan made waves in the Department of Health Care Services again earlier this year, when the agency issued a March letter [PDF] saying it discovered that a significant number of SCAN dual eligible members also are enrolled in and are receiving services through the department's county In-Home Supportive Service programs.
Since those people would be receiving duplicative services – both funded by separate pots of public money – the department called on county welfare agencies to be sure members were enrolled in only one program.
SCAN said the issue is an old one and it began ensuring three years ago that its members were not also being served by the other state- and county-funded in-home care program.
*Correction: An earlier version of this article gave an incorrect figure for expenses for the SCAN Foundation. The organization reported $12.8 million in total expenses and listed no lobbying expenses.
Christina Jewett is an investigative reporter for California Watch, a project of the non-profit Center for Investigative Reporting. Find more California Watch stories here.