State Officials Get Earful About ‘Temporary’ Medi-Cal Provider Moratorium from 1999

On Wednesday, legislators directed the Department of Health Care Services to revisit its policy to regularly extend a moratorium on certain fee-for-service Medi-Cal providers that dates back to 1999.

At yesterday’s Senate Committee on Health hearing, DHCS officials said the moratorium policy has worked well and they’re loathe to abandon it.

“We believe the moratorium has been an effective measure to reduce fraud,” said Karen Johnson, chief deputy director at DHCS. “It has been an effective measure to address program integrity issues and monitor provider types.”

Three kinds of providers are affected by the moratorium: clinical laboratories in four counties; durable goods suppliers; and non-pharmacist-owned pharmacies in Los Angeles County. The first moratorium went into effect in 1999, after an FBI investigation and “60 Minutes” exposé detailed up to $1 billion in Medi-Cal fraud, and the state ordered a halt on issuing new provider numbers for medical equipment.

DHCS concerns about the two other types of providers prompted moratoria on those provider groups in 2001 and again in 2002.

Laura Panos, director of genetic specialists at Ambry Genetics in Aliso Viejo in Orange County, said the moratorium hurts her business.

“For 15 years we’ve been trying to contract with Medi-Cal,” Panos said, “and we’ve been unable to do that — until last week. But we feel the moratorium has prohibited our ability to provide services to people in California.”

The moratorium has sometimes translated into waits of six months or a year for some Medi-Cal beneficiary services within Medi-Cal fee-for-service.

“When you have such a lengthy process, it discourages everyone from participating,” said Sen. Ed Hernandez (D-West Covina), committee chair.

Johnson said the parameters of exemptions to the three moratoriums have shifted over time. The department reviews the efficacy of the moratoriums every six months, she said.

Committee member Sen. Richard Pan (D-Sacramento) said he understood the need for a moratorium on providers in 1999 and asked Johnson when the department hoped to have fraud-prevention mechanisms in place to end the moratoriums.

“It is now 2015. I can see having the moratorium, but it has been a long time. When do we expect it to end?”

Johnson said the moratorium is examined every six months.

“But is there any intention to lift the moratorium?” Pan asked. “I’m not denying fraud doesn’t occur, but this seems to be a blunt instrument. … We’ve been extending it and extending it. Is that the main mechanism to limit fraud? That doesn’t seem to make any sense.”

“Data is going to drive our decision,” Johnson said. “It’s constantly being reevaluated. We think it has been an effective tool…”

“I think a moratorium by its nature is limiting access,” Pan said. “So using it as an instrument, I’m concerned about that.”

Pan also pressed Johnson about the long wait time for services. Johnson, who initially said six months was too long, eventually said a one-month wait was too long.

“It would be helpful to set a goal,” Pan said. “It’s important to have processes in place to root out fraud, but it’s also important to provide access.”

Committee member Sen. Bill Monning (D-Carmel) said he wanted to see a target for when the moratoriums might be lifted.

“What are short-term and long-term objectives to eventually lift the moratorium?” he asked. “Because if you have a six-month or one-year delay, you’ve missed the boat.”

New providers might have something new to offer, he said.

“By closing the door to participate we are stifling a free market, and possibly missing out on savings,” Monning said. “What is the moratorium leading to?”

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