Riding the wave of anti-managed-care sentiment, investigators in two states are taking serious action against alleged managed-care fraud. That backlash is quickly spreading to other states.
In California, state regulators have punished a major health plan participating in the state's Medicaid program for mailing "false and materially misleading" marketing materials, according to California officials. The plan may be investigated by HHS' inspector general's office, they said.
In New York, state Attorney General Dennis Vacco has threatened to sue the HMO that prompted him to file an antitrust lawsuit in February against the only two acute-care hospitals in Poughkeepsie, N.Y.
The California plan, Long Beach-based Molina Medical Centers, has nearly 152,000 enrollees in Medi-Cal, the state's Medicaid program. The plan was sanctioned by the state Department of Health Services this summer for allegedly sending falsified marketing letters to 22,000 of its enrollees in Southern California and engaging in marketing activities that violated state and federal laws as well as DHS guidelines and the state's Medi-Cal contract with Molina.
The letters, which informed Medi-Cal enrollees that they had to re-enroll in the Molina plan to ensure staying with their primary-care physician, had not been approved by the individual doctors involved or DHS, according to regulators.
On July 15, state officials suspended marketing of and new enrollment in Molina for 60 days, effective in mid-August. Molina was also hit with a $6,000 fine, but those sanctions have been stayed until an administrative law judge hears Molina's appeal. A hearing is scheduled for Oct. 26.
Information about the charges has been forwarded to HHS' inspector general's office by HCFA officials, according to Ken August, a DHS spokesman.
The initial sanctions were followed, on Aug. 10, by a letter to Molina officials from Ann Kuhns, chief of California's Medi-Cal managed-care division. Kuhns notified the company that it would not be eligible to compete for a new Medi-Cal contract in Sacramento. The plan now covers about 21,500 Medi-Cal enrollees in Sacramento County, about 14% of its statewide total.
Molina officials contend that they did not intend to break any laws or guidelines and do not believe they violated the terms of their contract with DHS.
"Obviously, we have a difference of opinion with the department," said John Molina on Sept. 3. He is the company's vice president of business services and a member of the founding family.
According to John Molina, Molina Medical Centers was acting as a provider, not an HMO, in the April communication to members that caused trouble with regulators. Molina Medical Centers operates 25 staff-model clinics in the state as well as the health plan. John Molina said that because of the provider connection, Molina officials believed they were operating under guidelines approved by state regulators.
Molina's appeal will not be heard before final bids for the Sacramento County Medi-Cal contract are due. State officials said if the administrative law judge rules for the company, however, Molina will be allowed to compete for that contract. If not, according to John Molina, the company may still be able to retain part of the business through its provider role.
Meanwhile, in the New York situation, state Attorney General Vacco alleges that Mohawk Valley Physicians Health Plan of Schenectady, N.Y., misled its members and denied them full access to mental health professionals included in the plan's official list of providers.
Vacco held a press conference announcing the lawsuit before serving MVP with a notice of intent to sue Aug. 25. The attorney general has not yet filed the suit.
Amy Ertel Bellcourt, an MVP spokeswoman, said the health plan was disappointed that the attorney general had not talked with the company when Vacco's office received the first complaint nearly three months ago. The issues could have been resolved sooner, she said.
On Aug. 27, MVP agreed to reimburse two of its enrollees for $1,000 in out-of-pocket expenses they incurred to see mental health providers listed among the HMO's practitioners, Bellcourt said.
Vacco spokesman Marc Carey was unavailable for comment last week, and other officials in Vacco's office declined to comment.
Vacco, who is running for re-election, has issued a number of press releases in the past few months criticizing various HMOs in the state.
Officials from MVP and the attorney general's office met late last week to discuss the possible withdrawal of the lawsuit, Bellcourt said.
MVP was the only health plan mentioned in the antitrust lawsuit Vacco filed earlier this year to break up the partnership between 317-bed Saint Francis Hospital and 252-bed Vassar Brothers Hospital, both in Poughkeepsie, N.Y., because of an alleged price-fixing arrangement (Feb. 16, p. 3).
Other states are also hopping on the anti-managed-care bandwagon.
The South Carolina Medical Association has asked the state Department of Insurance to investigate late payments of claims by some HMOs.
Bill Mahon, chief executive officer of the association, said he contacted the department in July after a survey by the Columbia (S.C.) Medical Society revealed that a whopping 93% of physicians said they routinely have trouble with third-party payers.
The department has already started to look into some cases, Mahon said. His association plans to do a statewide survey this fall.
"This (Columbia survey) is absolutely indicative of what's going on in the rest of the state," Mahon said.
The state medical association may also consider pushing legislation to establish payment parameters, Mahon said.
Officials at the Texas Department of Insurance told MODERN HEALTHCARE that they're investigating several HMOs over possible infractions. They declined to name the companies.
"We're looking at some issues with other HMOs," said Ron Dusek, a spokesman for the department, referring to an ongoing lawsuit against Kaiser Permanente.
Barbara Bisno, an assistant U.S. attorney in Miami, said her office is looking at disenrollment and re-enrollment practices at several HMOs. The plans allegedly dump sick patients and sign them up again when they're healthy.
No cases have been settled so far, and Bisno declined to comment on pending cases.
Bisno said she does not know whether managed care will become the next big federal anti-fraud initiative, but she expects the number of state and federal investigations to rise in coming months.
"As we get more comfortable with managed care, we will engage in more cases," she said. "There's a good deal of fraudulent activity out there."