As state sets higher Medi-Cal contract standards, some providers predict major disruptions

More than 1.7 million Medi-Cal patients may get a new insurance provider in the coming months as a result of the state’s first-ever competitive bidding process, but critics and some providers fear the change will cause major disruptions to care.

California’s Department of Health Care Services last month announced its intent to award $14 billion-worth of Medi-Cal contracts to three companies — Health Net, Molina and Anthem Blue Cross — down from nine. The deal is part of the department’s multifaceted effort to overhaul the behemoth program that provides health insurance for a third of all state residents. Medi-Cal is the state’s version of federal Medicaid, which serves low-income residents.

“We are raising the bar for all of our managed care partners,” state Medicaid Director Jacey Cooper said. “We will be very focused on quality and access to care.”

The new contract includes strict new quality standards for patient outcomes and financial penalties for providers that do not meet the goals. The new benchmarks are “significantly better” than previous standards and competitive bidding is long-overdue, said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Network.

“This is a really big deal. It’s something that we have consistently advocated for the state to do more often and on a specific schedule in order to maintain accountability,” Savage-Sangwan said.

Many patients will keep the same insurance provider, but in four counties — Los Angeles, San Diego, Sacramento and Kern — the largest incumbent plans were ousted, precipitating a significant transition for nearly half of commercial Medi-Cal patients.

An ‘immeasurable’ disruption

In Los Angeles, Health Net, the largest Medi-Cal managed care plan in the state, lost its coveted contract to Molina. More than 1 million patients, roughly one-third of all Medi-Cal enrollees in the county, have Health Net. The other two-thirds have coverage through the county-operated L.A. Care Health Plan.

Medical providers in L.A. that serve primarily Medi-Cal patients say the decision to offer Molina the county contract could cause “immeasurable” disruption.

“It would be profound,” said Jim Mangia, president and CEO of St. John’s Community Health in south L.A. “You’re talking about completely changing providers and provider networks. It would completely interrupt their systems of care.”

Nearly 25,000 patients at St. John’s — a quarter of the facility’s patient population — have Health Net and would need to switch to Molina, which has far fewer patients and providers. Expecting the company to contract with an equivalent number of doctors and specialists as Health Net in the next year is unreasonable, Mangia said.

The state expects new contracts to be fully implemented by January 2024 with the transition period starting as soon as Oct. 10.

“They’re a minor player in the Medi-Cal market. “Can they get 10 times bigger in that many months? I doubt it,” Mangia said. “You’re going to see a tremendous lack of access to specialty care, to hospital care and to primary care.”

Molina did not respond to multiple requests for comment. Health Net Vice President of Communications and Marketing Darrel Ng said in a statement that the company would defer to providers’ assessment of the ramifications of the contract change.

Health Net appealed the state’s decision in Los Angeles and eight other counties where it lost bids. In the L.A. appeal documents, Health Net alleges that the state’s decision to move to Molina will “jeopardize the stability of Medi-Cal and its provision of services to California’s most vulnerable.”

Some providers, however, were less concerned about the change, predicting that there would not be much of an impact on patients.

“In theory nothing should change. Technically, Health Net and Molina switching places should have no impact on the consumer,” said David Ryu, chief strategy and advancement officer at Kedren Community Health Center, a primary care and acute psychiatric hospital system in South L.A.

That assessment, however, assumes Health Net will subcontract with Molina, giving them access to their network of providers. Neither Health Net nor Molina have stated whether they will pursue that option.

If Molina retains the contract offer after the appeal process, Medicaid Director Cooper said there will be a 15-month transition period to ensure enrollees are aware of the change and do not experience any interruptions in coverage.

“We’ve been planning for this transition for months, probably even close to a year at this point,” Cooper said.

That planning includes hiring staff dedicated to the transition and contracting process and ensuring provider networks overlap significantly enough to prevent patients from losing access to doctors.

“We will make sure through our readiness process of all managed care plans…that they are ready and able to handle those continuity-of-care requests,” Cooper said.

Mangia predicted, however, that community health centers will be left to handle the most vulnerable and difficult-to-manage patients. A third of St. John’s patients do not have valid phone numbers or addresses, largely due to housing instability. Those patients frequently have complex health needs and providers are only able to find them when they show up at emergency rooms.

“Where are they going to send the letter? The state is going to send them a letter that says ‘You no longer have Health Net. You need to choose a new plan.’ Then people come in, they don’t understand it, they need help filling out the application. That’s a huge responsibility to dump on community health centers,” Mangia said.

“Every time there’s a change in health care in California, the cost and work of doing it gets pushed on the (health centers).”

Holding plans to higher standards

The state intends to award 28 new contracts across 21 counties to Health Net, Molina and Anthem Blue Cross, but the selections have raised questions about whether the plans can actually meet the new quality standards. Over the past decade, health outcomes and quality metrics have stagnated or gotten worse for Medi-Cal enrollees, and the three winners, which have current contracts across two-thirds of the state, maintain spotty track records.

Some of the new requirements include:

• Meeting updated quality benchmarks; 
• Publishing reports on patient outcomes, appointment access and wait times, and patient satisfaction;
• Investing up to 7.5% of annual profits into community-based organizations with additional investments required if quality benchmarks are missed;
• Hiring a chief equity officer and developing a plan to reduce health disparities;
• Monitoring primary care utilization and identifying patients that may be missing preventive care opportunities.

In 2019, the department updated its quality benchmarks, requiring California Medi-Cal plans to perform better than 50% of all Medicaid plans nationwide. The previous requirement was to do better than 25% of plans nationwide. Enforcement of the benchmarks was suspended due to COVID-19.

“Before we were letting all of our plans fail. Now we’re holding them to the average,” Savage-Sangwan said.

Anthem Blue Cross, which was offered the greatest number of contracts, historically has achieved poor to mediocre outcomes. For example, between June 2020 and July 2021, Anthem failed to meet 59% of its quality benchmarks across the 12 regions where it serves Medi-Cal members. Those metrics include breast cancer screenings, diabetes management and completion of childhood immunizations.

Health Net had a similar failure rate across seven counties. while Molina failed to meet quality benchmarks 38% of the time across four counties. Ng, of Health Net, said COVID-19 made 2020 “a difficult year for all of us” when it came to meeting quality standards, but the company recognizes the need for improvement and has made a “multi-million-dollar investment in quality over the past several years.”

Anthem and Molina did not respond to requests for comment. The state Department of Health Care Services said three years of quality metrics were analyzed during the bidding process.

Losing bidders have submitted appeals in more than half the counties where bidding took place, claiming competitors overpromised their Medi-Cal services and that the Department of Health Care Services implemented an unfair scoring system.

One such appeal came from Community Health Group, the largest Medi-Cal provider in San Diego County and one of the highest-performing insurance plans in the state. It lost the initial bid to Health Net and Molina.

“(The decision) was quite shocking,” said chief operating officer Joseph Garcia. “In every measurable metric, we are way ahead.”

In 2019, Community Health Group was the fourth-highest-ranked Medi-Cal insurer in the state, according to state data, beaten only by San Francisco Health Plan and two Kaiser plans, which tend to serve healthier patients. In contrast, Molina’s San Diego plan ranked 16th and Health Net’s ranked 29th.

Garcia said he has “a lot of questions and a lot of concerns” about how the Department of Health Care Services awarded points to bidders. Health Net and Molina were awarded points for proposing community engagement strategies that Community Health Group already implements, he said.

“We’re going to give you more points because you’re going to do something? We should get more points because we’re already doing it and members don’t have to wait,” Garcia said.

Like in L.A. County, San Diego providers say this decision will cause a major disruption to patient care. Community Health Group serves the largest proportion of Medi-Cal patients — approximately 326,000 — out of the seven Medi-Cal insurers in the county.

“Good grief. Medi-Cal populations have a complexity of needs. It’s not like we can just transfer them and give them a new card. ” said Zara Marselian, CEO of La Maestra Community Health Centers in San Diego. “We’re going to have to hire more staff.”

Marselian said La Maestra has worked with Community Health Group for nearly three decades and its history as a health center that grew into a Medi-Cal insurance plan gives it insight into what the population needs.

“They started managed care before the state did managed care,” she said. “They really understand the Medi-Cal population, the challenges, the disparities and the incredible amount of work it takes to help them navigate through all of the systems so they can attain health and well-being.”