Blue Cross Targeted With Fines By County Medi-Cal Manager

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Blue Cross Targeted With Fines By County Medi-Cal Manager

Health Care

by Laurence Darmiento

For the first time in its five years of operation, L.A. Care Health Plan has fined a subcontractor for allegedly violating its regulations.

Blue Cross of California, the plan’s largest subcontractor, was hit with a $40,000 fine, dating back to a 1999 dispute in which L.A. Care accused it of failing to mail informational materials to its Medi-Cal members.

The fine is a drop in the bucket for Blue Cross, a subsidiary of Thousand Oaks-based Wellpoint Health Networks Inc. But it’s notable for coming just a few months after Howard Kahn took over as chief executive of L.A. Care, a non-profit HMO that manages the county’s 750,000 Medi-Cal beneficiaries through contracts with Blue Cross and other insurers.

The move could signal a new get-tough attitude from Kahn and L.A. Care about the performance of its subcontractors, though Kahn, a former Cigna Corp. executive, strongly disputes that characterization. He maintains the fine was a move on his part to wrap up a dispute that had been festering for years.

“The issue predated me,” said Kahn. “My only hope is to make for better relations. There is no grand statement here.”

Blue Cross officials didn’t see it that way, noting that the fine came after the insurer had agreed to engage in future mailings. “We are paying the fine and moving on, because it’s a done deal,” said company spokesman Michael Chee. “But we already had agreed to the request.”

Relations between L.A. Care and Blue Cross became strained last year after rumors that Blue Cross, which serves 316,000 county Medi-Cal patients, wanted to take over the operation. Blue Cross has denied any such interest.

No Authority

No change in governance is going to cure the health department’s fiscal ills.

That, in essence, was the conclusion last week of a long-awaited report by an ad hoc committee studying the governance of the Los Angeles County Department of Health Services.

The committee was appointed by the Board of Supervisors last year to study whether the department might be better off if it were insulated from day-to-day politics, perhaps through the creation of a health authority.

But the committee concluded that the possible change in governance should be put on hold while the board and health officials deal with a more pressing problem: a drastic drop off in federal aid that will leave a nearly $700 million shortfall in three years. Also noted is that the department’s new director, Dr. Thomas Garthwaite, just started last week.

Instead, the committee recommended that the county improve the current governing structure, speed up implementation of reforms proposed by a blue ribbon task force and establish a financial oversight group.

The board voted to accept the recommendations, with the exception of Supervisor Zev Yaroslavsky, a strong supporter of a health authority, who said, “I smell a punt here. A big punt with a capital “P.””

IPA Reorganization

A Pomona Valley independent physician association that sought Chapter 11 protection two years ago has had its reorganization plan approved.

Pomona Valley Medical Group is an Upland-based IPA that serves eastern Los Angeles County. The IPA entered bankruptcy court with just $2 million in assets and nearly $20 million in debts. The reorganization plan, supported by a $3.6 million fund, will pay off creditors, including its contracted physicians, up to 20 cents on the dollar, said bankruptcy attorney Marc Winthrop.

While that may not sound like much, Winthrop said it’s better than what normally happens. “Everybody usually just folds up their tent and goes away,” he said.

Staff reporter Laurence Darmiento can be reached at (323) 549-5225 ext. 237 or at

[email protected]

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