In an unusual move, state regulators are ordering nine health plans to terminate their contracts with Employee Health Systems Medical Group Inc. and transfer 600,000 patients to different health care providers, after a company affiliated with Employee Health Systems was accused of blocking patients’ access to specialists to hold down costs.
The order has left plans scrambling and providers expressing concern that patients may face serious disruptions in care.
Employee Health Systems’ 600,000 patients statewide includes about 70,000 in the Sacramento area, according to company spokeswoman Kassy Perry. The company, which does business as EHS Medical Group, is based in Monterey Park, in Southern California. About 90 percent of EHS’s patients are on the state’s Medi-Cal program for lower-income Californians. Approximately 13.4 million Californians receive coverage through Medi-Cal.
“Something like this has never happened before,” said Sean Atha, senior vice president of business and network development at Sacramento-based River City Medical Group. He also formerly served as a regulator with the California Department of Health Care Services. “The health plans are sweating bullets just because of what they’re being asked to do.”
The California Department of Managed Health Care claims that SynerMed Inc. — a health management company closely affiliated with EHS — secretly and systematically blocked patients and providers from accessing contracted specialists that SynerMed deemed too costly. A cease-and-desist order issued on Dec. 26 by the Department of Managed Health Care requires the health plans to terminate their contracts with EHS by early February and transfer all patients to different medical groups or physician associations.
EHS, which denies knowledge of SynerMed’s actions, claims the department’s order could pose serious issues for patients and providers.
“Moving 600,000 patients from their primary or specialty care provider to another (so) abruptly given there is no imminent threat disrupts patient care and threatens their health and welfare,” Perry said in an email. “Uprooting them from their primary care provider or (specialist) is simply creating a problem where none exists.”
After state regulators launched an investigation of SynerMed in October, the company announced it would close its doors due to what CEO James Mason called “system and control failures.” An internal compliance report sent to state regulators claimed that SynerMed denied care to potentially thousands of patients and falsified documents to cover up its actions, Kaiser Health News reported last month. In response, EHS said it would cut ties with SynerMed and replace it with a new medical management organization.
SynerMed’s blocking of specialists, as described in the cease-and-desist order, is a new allegation, arising from the state’s investigation. Some in the health care industry believe it could spark additional regulation and oversight of the administrative and medical management of Medi-Cal patients.
“The (Department) is committed to its mission of protecting consumers’ health care rights and ensuring a stable health care delivery system,” said Rodger Butler, spokesperson for the Department of Managed Health Care, in an email. He declined to respond to any specific questions about the investigation into SynerMed, citing the confidential nature of the investigation.
EHS’s network includes more than 6,500 health care providers in nine counties, including Sacramento.
The Department of Managed Health Care’s cease-and-desist order claims that SynerMed’s CEO sent an email in June containing a “contracting playbook,” which included directives aimed at lowering specialist costs for EHS. One of the directives was to “re-narrow the specialty network via termination and removing (specialists) from the (web) portal” that was used by primary care physicians to refer patients.
“In implementing the ‘Contracting Playbook,’ SynerMed staff was affirmatively directed to hide, or ‘suppress,’ providers from the referral system based in whole or in part on the cost of the services rendered by those providers,” the order states.
SynerMed staff used a data analytics program called “Tableau” to identify high-cost specialists. Staff members focused initially on cardiologists and over time targeted diagnostic radiologists, dialysis providers, hematologists, oncologists, nephrologists, ophthalmologists and rheumatologists, according to the order. These specialists maintained contracts with EHS, according to the Department of Managed Health Care, but patients “had no access to these numerous suppressed providers, which SynerMed unilaterally deemed to be high-cost.”
Although SynerMed staff were directly responsible for narrowing the network of specialists, the Department of Managed Health Care does not spare EHS in the order. It states that the company was acting “through SynerMed” to reduce costs. While the two companies are separately registered with the California Secretary of State, EHS and SynerMed share the same headquarters in Monterey Park and offices in Sacramento, Fresno and San Bernardino. Additionally, EHS exclusively subcontracts with SynerMed for its medical management and administrative functions.
EHS says that it wasn’t involved in or aware of SynerMed’s suppression of specialists in EHS’s network portal.
“EHS strongly denies knowledge of SynerMed’s ‘playbook’ to reduce member access to specialists and treatments in the EHS network of physicians,” said Perry in an email. “We were appalled by the allegations brought to light by whistleblowers (in November) and immediately took action to terminate our contract with SynerMed … In the interim, EHS has instructed SynerMed to approve the majority of treatment authorization requests without review to ensure member access to appropriate care.”
On Dec. 22, four days before the state filed its order, EHS issued a news release distancing itself from SynerMed.
“EHS wants to make it perfectly clear we were unaware of any of these deceitful and deceptive practices” by SynerMed, the news release states. “EHS is appalled to think that any of our patients may have been denied or delayed care due to the reprehensible conduct by SynerMed. Furthermore we find it shameful that SynerMed took blatant steps to falsify documents to hide their abhorrent conduct.”
In the news release, EHS stated it was conducting its own investigation into the matter and cooperating with state regulators on their investigation. According to Perry, the medical group believes it is being “unfairly targeted by the Department.”
The cease-and-desist order is not directed at EHS or SynerMed, but rather the health plans that contract with EHS. Those health plans include Adventist Health Plan Inc., Aetna Health of California Inc., Blue Cross of California Inc., Care 1st Health Plan, Cigna Health Care of California Inc., Health Net of California Inc. and Molina Healthcare of California Inc. The order also names Fresno-Kings-Madera Regional Authority and Local Initiative Health Authority for L.A. County, which are public agencies that provide regional health care coverage.
Acacia Reed, executive director of provider network management at the Local Initiative for L.A. County’s L.A. Care plan, said EHS provided service for about 60,000 L.A. Care plan members. An estimated 68 percent will be able to keep their primary care physicians, she said in an email. Aetna spokesperson Shelly Bendit said approximately 3,800 Aetna members will be affected by the order, but most will be able to keep their primary care physicians.
Anthem and Molina representatives declined to comment for this story. The other plans did not immediately respond to requests for comment.
“While investigations and audits by regulators are underway, health plans will continue to provide covered services to all affected enrollees as quickly and as seamlessly as possible,” said Mary Ellen Grant, vice president of communications at the California Association of Health Plans. She said the health plans have adequate provider networks to successfully transfer the 600,000 patients.
According to the order, health plans must receive approval from the state to deny patients access to contracted providers based on cost — a practice called “economic profiling.” While there is no indication in the order that the health plans were privy to SynerMed’s effort to narrow EHS’s specialist network, the order states the health plans are in violation of the state Health and Safety Code because none of them received approval from the Department of Managed Health Care to conduct economic profiling.
EHS spokesperson Perry said that the order requires the health plans to establish a transfer plan before patients can be moved to other medical groups, but that “several plans have started the process, in violation of the order.”
“Discussions of contract terminations are premature,” she said.
The order, however, requires the health plans to take “immediate steps to terminate their contracts (with) EHS.” By Jan. 3, the health plans must file a transition plan to the Department of Managed Health Care that includes the steps they will take to sever contractual relationships with EHS, a timeline for the removal of enrollees from the medical group and details on how plans will ensure continuity for care for transferred patients. By Feb. 5, the plans are required to file a “Final Proof of Compliance” that affirms the termination of the plans’ relationship with EHS.
Perry said that state law requires a 75-day notice before health plans can move members to different medical groups, and that the Department of Managed Health Care’s order is therefore in violation of state law. EHS has set up a meeting with the department later in the week to discuss potential alternatives to contract terminations detailed in the order, Perry said.
Stan Rosenstein, a consultant at Health Management Associates and the former head of the Medi-Cal program for the California Department of Health Services, said the order from the Department of Managed Health Care carries significant implications.
“It’s pretty dramatic,” he said. These kinds of actions are “not something that the DMHC does lightly.”
Rosenstein said the order from DMHC could indicate increased regulation in the medical and administrative management of Medi-Cal patients. Some in the health care industry say they have already felt the effects of increased oversight following the investigation into SynerMed.
“Everything that happened with SynerMed has literally changed the industry,” said Atha of River City Medical Group. “Regulators are in our business like they never were before … I would almost guarantee there will be new regulations set up to oversee this area.”