State’s Reluctant Takeover of Local Health Plan Contested in Superior Court

The state’s takeover of the Alameda Alliance for Health, a local health plan in Alameda County, came suddenly and dramatically — but not surprisingly.

After months of negotiations and fiscal trouble at the Alliance, state officials finally decided they couldn’t wait any longer and needed to act. On the first Tuesday in May, the state placed four Alliance administrators on leave and escorted them out of the building.

It was the culmination of a long struggle over the public health plan’s financial practices. State officials say it was an action they didn’t want to take, but rather a choice they needed to make.

“The straw that broke the camel’s back was that … we found out the claims system failed, and over … four months the plan didn’t make claims to its providers,” said Shelley Rouillard, director of the Department of Managed Health Care, which took the action.

Financial trouble was one thing, Rouillard said, but not paying claims violated the law.

“That is the largest claims violation in the history of this department,” Rouillard said. “Because the plan was unable to fix it, we had to take it over in order to save it.”

‘It Will Be Whittled Away’

Alameda Alliance administrators and board members also say they want to save it. They worry that the state and the conservator it installs to run the Alliance will do much more harm than good.

They’re petitioning Alameda County Superior Court to reject the state’s choice of conservator and to let Alliance officials dig the not-for-profit health plan out of its hole.

A court date is set for June 2.

“There had been a number of issues with us, especially with the IT conversion [that resulted in claims violations],” said Jane Garcia, longtime board member of the Alliance who also sits on the California Endowment board and is CEO of La Clinica de la Raza, the largest community health care provider in the Bay Area.

“But even as [state replacements] were coming in, our staff had already started to go back to the old system and process claims,” Garcia said. “We were fixing it. We’re just asking the state to give us 90 more days.”

Garcia said the administrators at Alameda Alliance for Health have shown they’re capable. Most of the health plans’ members are Medi-Cal beneficiaries  and one of the real challenges has been dealing with the extremely low Medi-Cal reimbursement rates, she said.

“The leadership we have had in place has been there since 2003, successfully managing the plan for 10 of those years,” Garcia said. “They are a real asset in the community. The last years have been difficult but for a lot of reasons. … If you think you can do better, good luck,” she said with a smile, “I want to see that.”

Corinne Jan is CEO of Family Bridges, a not-for-profit care network based in Oakland. Many of Jan’s clients are Alameda Alliance members.  

“The real concern is the hundreds of thousands of members who have no idea what’s at risk here,” Jan said. “The health plan will be whittled away, the doctors will go out of network.”

Fixing the Alliance isn’t just a matter of trimming costs, Jan said. Cutting has a cost, too, she said.

“I mean, I’m assuming a conservator will want to cut staff, cut contracts, cut rates to providers. If the people who provide service won’t be paid adequately, they’re not going to want to be in the network.”

State Officials Moving Carefully

Appointing a conservator will not only help the Alliance, but it’s necessary at this point, Rouillard said.

“The conservator is the last step. This is the last thing we want to do,” she said. “Financial viability is a high priority for this department. … I’m not aware of any other plan in the state that has anything like this, or even approaching this, going on.”

The trouble with Alameda Alliance came to light about a year ago, Rouillard said. “The plan had a steady decline in financial viability, it was going downhill but it was never falling off the cliff till last June,” Rouillard said. “At that time, we worked with the plan, from August to November we worked on actions they should take. But they weren’t making progress, it seemed like they were just digging themselves in deeper.”

In December, the state urged the Alliance to pay for a program monitor, and they agreed to bring in the Berkeley Research Group. That didn’t go well.

“They were identifying ways to improve the financial status, but many of those things were not implemented,” Rouillard said, “and the plan continued to decline. They just weren’t making good enough progress. We set up a series of benchmarks the plan needed to meet in February. But we got all pretty negative reports.”

Then the new computer system to process claims failed, and Rouillard said that didn’t give her much choice except to act.

“We want to work with the plan and not take it over [forever]. We want the plan to continue,” Rouillard said. “But we need to take it over now to save it. The conservator’s number-one job is to get the claims paid. They need to do whatever needs to be done to accomplish that.”

Conservator Conflict

The state wants Berkeley Research Group to be the conservator of the Alameda health plan and that has rubbed some people the wrong way.

“You have to look at how they got to this point,” Jan said. “BRG was feeding [the state] information, and the state made a decision based on what was said to them by BRG. And now BRG is going to be the conservator?”

Jan said BRG had a financial incentive to angle for becoming conservator, creating an obvious conflict of interest.

“That makes it extremely conflictual,” Jan said. “They’re the ones that reported to DMHC in the first place. How arrogant is that? How disrespectful is that?”

Jan said she believes the state wants to turn the Alliance back over to local control, but she worries that damage will be done in the meantime.

“The law is the law, but it’s a little bigger than that,” Jan said. “It’s more complicated than that. They’re just responding to numbers. When something this huge is at stake, you have to look at the accuracy of the information you have before you make that kind of decision.”

It will all come to a head June 2, when a judge in Alameda County Superior Court will decide whether to make Berkeley Research Group the state’s conservator of Alameda Alliance for Health.

“I made it clear to the board to continue to work with them, even though they don’t have governance right now, and that’s what I plan to do,” Rouillard said. “I’m not happy with the tone of their court filing, but we do still have the goal of turning it back to them at some point.”

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