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DHCS Director Apologizes at Hearing Examining Medi-Cal Drug Program Fraud

Department of Health Care Services director Toby Douglas apologized for “lapses in state oversight” of a Medi-Cal drug abuse treatment program at a hearing yesterday in Sacramento.

“I’m here to tell you that we are sorry that we did not take action sooner,” Douglas said. “We now know the extent of the problem… We want to make sure this never happens again.”

Yesterday’s joint legislative oversight hearing was convened to address allegations of fraud and Medi-Cal system abuse within the Drug Medi-Cal program, which is overseen by DHCS. Reports by the Center for Investigative Reporting and CNN said rampant and persistent fraud went relatively untouched by state oversight.

Assembly member Richard Pan (D-Sacramento), chair of the Assembly Committee on Health, had some strong words to frame the discussion.

“We’ve heard story after story about alleged fraud in the Drug Medi-Cal program,” Pan said. “Questions have been raised about provider certification, and the lack of follow-up by responsible agencies about concerns raised about fraudulent activity. Personally, as a physician who cares for children on Medi-Cal, I am outraged.”

Pan laid out some of the allegations:

  • Fabrication of patient documents;
  • Busing teenagers without drug problems from group homes to rehabilitation clinics;
  • Paying patients to show up for fictitious counseling sessions;
  • Billing for patients who are incarcerated or dead; and
  • Charging for too many client counseling appointments. “In one case, 179 clients were reportedly treated one day,” Pan said, “when reporters who staked out the clinic documented fewer than 30 people entering or leaving the clinic.”

“It’s a fractured system,” Douglas said. The fixes his department is working on, he said, would not just address the immediate problem, but include long-term solutions, as well.

Karen Johnson, chief deputy of DHCS and the head of audits and investigations, outlined some of the proposed remedies:

  • “We are making on-site visits to all of the facilities in the state of California,” Johnson said, “to make sure [they’re] conforming to the program requirements.”
  • The department has a team of researchers and auditors working on data mining, Johnson said, to look for red flags in the payment system and refer cases to the state Department of Justice.
  • The department has suspended 58 providers it suspects of fraud, Johnson said.
  • All providers in the Drug Medi-Cal program will need to be recertified.

“We will be requiring all Drug Medi-Cal providers to go through recertification,” Johnson said. “We have increased resources to fight this problem as it becomes clearer.”

“It’s clear that the accountability and oversight in this program need improvement,” Douglas said. “This is the beginning. We don’t have all of the answers. We do have many answers [to address this], but not all of them.”

The bottom line, said Douglas: “We should’ve done better,” he said. “The department, the state, we should’ve done better. … There were serious lapses in state oversight. For example, there were many concerns raised about drug fraud, and sometimes they were acted on, but not consistently.”

He said another issue arose around responsibility: “Sometimes [fraud concerns] were referred to the Department of Justice, which is the proper protocol. And sometimes they were referred to DHCS. We assumed they were also sent to DOJ, but that was not the case.”

Pan said the severity of the issue, and the lack of oversight around it, means there needs to be a fundamental shift in how the system is run.

“We don’t want to just lance the [Drug] Medi-Cal fraud, we want to treat the problem,” Pan said. “We need to understand what went wrong.”

Related Topics

Capitol Desk Medi-Cal