By William Espinosa

On March 4, 2022, the Department of Managed Health Care (DMHC) released a statement detailing its enforcement action against Local Initiative Health Authority for Los Angeles County (L.A. Care), the state’s largest Medi-Cal plan. The action is the result of DMHC’s joint investigation with the Department of Health Care Services (DHCS), which, according to the statement, was spurred by a 2020 Los Angeles Times article, and revealed numerous operational violations by L.A. Care causing harm to Los Angeles’ poorest patients. DMHC’s 45-page accusation details L.A. Care’s repeated violations of the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene) including violations concerning the handling of enrollee grievances, the processing of requests for authorization (utilization review or utilization management), overseeing and adequately supervising its contracted entities regarding timely access, and the processing of claims. According to the accusation, “[t]he widespread, systemic, and unrelenting nature of these violations is unprecedented and has caused harm to Respondents’ enrollees.” Of note, in 2021, L.A. Care disclosed to DMHC and DHCS a systemic failure to timely issue grievance resolution letters to enrollees dating back to 2017. The agencies’ joint investigation revealed that as of December 2021, L.A. Care had failed to timely resolve 67,717 instances where the plan failed to respond in a timely manner to grievances for several lines of business. Additionally, L.A. Care disclosed that the plan had a backlog of 9,125 processing requests for authorizations of health care services for DMHC, and 8,517 requests to the DHCS for a three-month period in 2021. Upon further inquiry, DMHC and DHCS identified 92,854 further instances in which prior authorization requests were not processed in a timely manner from January 1, 2019, through October 13, 2021. DMHC and DHCS also found that L.A. Care had failed to maintain sufficient organizational and administrative capacity to provide services to members.

DMHC’s statement about the action asserts that all of these operational violations had detrimental impacts on L.A. Care members, such as unnecessary delays in receiving medical treatment. Ultimately, DMHC issued a $35 million penalty, and DHCS issued a $20 million sanction on L.A. Care. According to the Los Angeles Times, the total $55 million fine is reportedly the largest enforcement action in California history.