A California health plan that the state Department of Health Services accused of sending misleading information to its Medicaid patients has settled the case.
Long Beach-based Molina Medical Centers agreed to drop its appeal and pay a $6,000 fine to the state. The state sanctioned the managed-care company in mid-July for mailing what it called "false and misleading" marketing materials this spring to nearly 22,000 Southern California enrollees of Medi-Cal, the state's Medicaid program (Sept. 14, p. 22).
On July 15, state officials suspended marketing of and new enrollment in the health plan for 60 days, effective in mid-August, and imposed the $6,000 fine. Molina appealed, and those sanctions were delayed until a hearing with an administrative law judge, set for Oct. 26. But Molina agreed to settle the dispute after a series of meetings between company and DHS officials in early October.
Molina has since paid the fine and taken other steps to comply with the state's sanctions. In return, regulators retracted a demand that Molina send a follow-up mailing to enrollees who might have been misled by the earlier marketing letters.
As part of the settlement, Molina also accepted without protest a two-month suspension of new enrollment in Riverside and San Bernardino counties in Southern California.
In an earlier agreement with state and federal regulators over unrelated regulations, the company also faces restrictions on its ability to do Medi-Cal managed-care business in Sacramento County. There it has to subcontract as a provider group with Los Angeles-based Maxicare Health Plans rather than act as a Medi-Cal health plan. Those limitations could cost it as much as $1 million, according to an account late last month in the Sacramento Business Journal. Company officials dispute that number.
"We agreed it was in the best interests of everybody to put this behind us," said John Molina, the company's vice president of business services and a member of the founding family.
"There has never been a question about the quality of care that we provide," Molina said.
Significantly, he said, regulators "did not foreclose" on the company's opportunity to do Medi-Cal contracting in Sacramento in the future. But he was unsure when it would have the opportunity to do so.
Ann Kuhns, who until recently was chief of the Medi-Cal managed-care division in California, has indicated that the agency still is reviewing the case.
Until the recent state sanctions took effect, Molina Medical Centers' Medi-Cal contract in Sacramento covered 21,500 Medi-Cal enrollees, or about 14% of its 152,000 Medi-Cal enrollees statewide. So the company's Medi-Cal enrollment is down to about 130,500.
In addition, Molina this spring launched another HMO, dubbed American Family Care, that provides coverage to approximately 2,000 enrollees in non-Medi-Cal programs in California.
The company also operates 25 staff-model clinics in the state. Before settling with the state, it had argued that the marketing materials in question involved its role as a provider, not as an HMO.
Molina reported a $1 million net loss last year on more than $111 million in revenues.
Molina was sanctioned for its marketing letter and for allegedly 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 by DHS, according to regulators.
Prior approval of Medi-Cal marketing materials is required under state and federal law.
In the midst of its maneuverings with state regulators, Molina named a new executive to take on some of the responsibilities of Chairman J. Mario Molina, M.D.
George Goldstein, formerly CEO of United HealthCare Corp. of Southern California and Nevada, will assume the role of Molina Medical Centers' president on Dec. 7. J. Mario Molina will remain the company's chairman and CEO.