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California State Auditor Report Number : 2014-130

California Department of Health Care Services
It Should Improve Its Administration and Oversight of School-Based Medi-Cal Programs

August 20, 2015 2014-130

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the School-Based Medi-Cal Administrative Activities program (administrative activities program) and the Local Educational Agency Medi-Cal Billing Option Program (billing option program) administered by the California Department of Health Care Services (Health Care Services). This report concludes that while the reasonableness test criteria process that Health Care Services used to review reimbursement claims for the administrative activities program from October 2013 through October 2014 was reasonable and not inconsistent with federal requirements, Health Care Services approved fewer than 10 percent of the claims submitted under this process. The entities with which Health Care Services contracts to review reimbursement claims—local educational consortia and local governmental agencies—added little value during this review process; they approved and forwarded to Health Care Services claims that did not comply with the reasonableness test criteria benchmarks and other limits. Furthermore, Health Care Services is behind in its required reviews of local educational consortia and local governmental agencies, which increases the risk that these entities are not performing the administrative tasks for which they are responsible. Health Care Services also does not effectively oversee the contracts between the local educational consortia or local governmental agencies and the claiming units.

Furthermore, Health Care Services missed an opportunity to cut costs through the implementation of a single statewide quarterly time survey when it implemented the random moment time survey methodology. We estimate that the administrative activities program could save as much as $1.3 million annually in coding costs alone if Health Care Services conducted a single statewide quarterly time survey. However, if Health Care Services implemented its own single statewide quarterly survey and took over responsibility for overseeing the administrative activities program, thus eliminating the need to use the local educational consortia and local governmental agencies for these purposes, it would result in significant savings to the administrative activities program.

In addition, Health Care Services could increase federal funding by an estimated $10.2 million annually if more claiming units participated in the program and could have increased federal reimbursements by about $4.6 million from February 2009 through June 2015 if it increased the reimbursement rate for translation activities to the rate allowed by federal law. Finally, Health Care Services has not complied with state law requiring the adoption of regulations for its administrative activities program and has failed to issue a required annual report for its billing option program.

Respectfully submitted,

State Auditor

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