MANAGED CARE: Patients Hurt by Graf’s “Dubious Deals,” State’s Bureaucracy
Having had two of his "health care ventures" shut down this year, Irvine businessman James Lee Graf has been plagued by lawsuits, bankruptcies, increasing debts and regulatory probes by California state regulators. But Graf persisted -- this time by "providing management services to an unlicensed insurer who illegally collects health care premiums for about 3,000 unsuspecting southern California patients." Last week, the state moved to close the operation -- Riverside-based National Consumers Benefits Association (NCBA) -- despite Graf's denial of any "wrongdoing" and claims that state officials are on a "witch hunt." Graf's various health care ventures highlight a growing problem faced by regulating officials -- lack of consistent regulation. Different parts of the health industry are overseen by various state agencies that are "often slow to flex their regulatory muscles." The results of this "regulatory hodgepodge," coupled with increased rates, have forced many small companies and beneficiaries out of big-name insurance plans -- leaving consumers "prey to financially shaky or illegal operations that promise low-cost health care coverage." Department of Corporations spokesperson Christopher Nuechterlein said, "Part of the dilemma is there are a lot of (businesses) out there looking for schemes and gimmicks, and they often land in a gray area. They try to go into a crease ... to evade scrutiny and regulation." Graf's practices could serve as a "road map" for officials. He has had his HMO's license revoked because it posed "substantial risk" to patients. His Prime Care Health Network Inc. was shut down last year after officials found he had used funds allocated to patient care for his own personal use, including $380,000 as a down payment on a home. Graf also has filed for bankruptcy four times, owned or controlled companies that have accrued over 20 lawsuits -- owing patients, investors and creditors millions -- and has seen the stock of a company under his leadership lose 99% of its value. Until the problem of jurisdiction is solved, state officials and many consumers -- now in deep debt over Graf's failed businesses -- will continue wondering, "What does it take to stop someone like that?" Although the DOC and the state Department of Insurance have closed Graf's operations on numerous occasions, the actions typically came too late for patients "allegedly bilked out of premiums." With regard to the current Graf-related probe, the DOC issued a cease and desist order Thursday against NCBA and its director Raymond Palumbo. According to the order, the organization must terminate all health-service operations by November 30 (Crabtree, Orange County Register, 11/7).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.