Battle between Molinas forces thousands to switch doctors

Molina Healthcare is kicking former CEO Dr. J. Mario Molina's medical practice out of its network, forcing roughly 78,000 patients to either find new doctors or switch health plans to keep their current ones.

After Dr. Molina was pushed out as CEO in 2017, he bought up Molina Healthcare's California primary-care clinics and rebranded them as Golden Shore Medical Group. The insurance company had planned to shut the clinics down to focus on insurance as part of an organization-wide overhaul to increase its margins.

Molina Healthcare's current contract with Golden Shore Medical expires at the end of January and the insurer doesn't plan to renew it. A Molina Healthcare spokeswoman said the decision is the result of Golden Shore's "substantial financial losses" that have put it under a corrective action plan with the California Department of Managed Health Care, as well as "an insupportable out-of-market rate increase."

Dr. Molina, however, said the company's animosity toward him is driving the decision. When he and his brother John Molina, who was the insurer's chief financial officer, were unexpectedly ousted from the family business, Dr. Molina and many others speculated it had something to do with his advocacy for the Affordable Care Act and outspokenness against Republican repeal efforts. At the time, he was one of the only healthcare CEOs publicly criticizing the Trump administration.

Still, equity analysts say Molina's profit margins had been well below those of other health insurers. The company recorded a loss of $512 million in 2017 but has been bouncing back. In the nine months ended Sept. 30, Molina posted profit of $506 million, compared with a loss of $250 million during the same period in 2017.

This isn't the first contract fight between Molina Healthcare and its former CEO. Securing Golden Shore's 2018 contract wasn't easy, and it ended with Golden Shore being "grossly underpaid" for the patients it serves, Dr. Molina said. That led to losses—north of $20 million in 2018.

Dr. Molina said Golden Shore asked for rates to better reflect the costs of its mostly Medicaid patient population, many of whom are on dialysis, but was rejected. Dialysis utilization in Sacramento was four times what Golden Shore expected, and in Southern California it was two times what the medical group expected, he said.

"I am concerned because our patients will face disruptions in their care," Dr. Molina wrote in a blog post on LinkedIn. "They will have to establish relationships with new doctors and leave doctors who, in some cases, have cared for their families across multiple generations. As a percentage of our patients, we are caring for some of the sickest, most medically complex people in California. Disrupting their care will disrupt the quality of their health."

Molina Healthcare said it is working with the state to ensure members have a smooth transition to new doctors, effective Feb. 1.

Dr. Molina said it's common for growing medical groups to fall out of compliance with state solvency requirements. Two of the medical groups that Molina Healthcare proposed moving Golden Shore patients to—Vantage Medical Group and Allied Physicians of California—have also been under corrective action plans, he said. Molina Healthcare did not confirm that patients were being transitioned to physicians with those medical practices.

California requires any risk-bearing medical organizations to maintain positive tangible net equity and working capital. It also requires organizations to keep a cash-to-claims ratio of more than 75%, process 95% of claims within 45 working days, and document the estimated incurred but not reported claims. Compliance with these measures, which are reported quarterly, are meant to help the department ensure providers are solvent.

Golden Shore Medical fell out of compliance with the tangible net equity and working capital requirements, according to documents posted on the California Department of Managed Health Care's website, but Dr. Molina said the medical group is back in compliance today. As of June 30, 8% of the state's 188 risk-bearing providers were not compliant with solvency requirements, up from 6% at the end of the first quarter 2018, according to the department.

The vast majority of Golden Shore's patients are Molina Healthcare members, because for decades the clinics were owned by the insurance company. About 92% are having to switch doctors because of the dispute, but Dr. Molina worried they aren't being given enough notice to make a decision.

Golden Shore is beginning a campaign to keep as many patients as it can by notifying patients that they will have to change plans if they want to keep their current doctors. Medicaid patients in California can switch insurers at any time, for any reason. Golden Shore also has contracts with Aetna, L.A. Care Health Plan, Health Net and Inland Empire Health Plan.