L.A. Care Health Plan Fined $55M For 'Deep-Rooted, Systemic Failures'

The public plan acknowledged problems with its grievance resolution process, but called the fine excessive.

L.A. Care Health Plan, the nation's largest publicly operated health plan, has been fined $55 million by two state agencies for its "deep-rooted, systemic failure" to act on enrollee grievances.

“The magnitude of L.A. Care’s violations, which has resulted in harm to its members, requires immediate action,” Department of Managed Health Care Director Mary Watanabe and Department of Health Care Services Director Michelle Baass said in a joint statement.

“Our investigations found several operational failures at L.A. Care, which have significantly impacted the health and safety of some of the state’s most vulnerable health care consumers. This action is necessary to protect the plan’s members, and to get L.A. Care to make serious changes to repair the plan’s operations.”

In a statement released to HealthLeaders, L.A. Care said it brought the issue to state regulators and agreed that corrective action was needed – and has been taken -- to fix the plan's grievance process.

However, the payer said, "we disagree about the amount of the proposed fine as being disproportionate to the value L.A. Care brings to our members and our network of safety net and community providers."

"While L.A. Care anticipated and was prepared to pay a substantial financial penalty, we are surprised and disappointed with the unprecedented size of the state’s proposed financial penalty of $55 million," the statement read. "The proposed penalties seem arbitrary and unnecessarily punitive. L.A. Care will contest the financial penalties through the available processes."

California health plans must acknowledge receipt of non-urgent grievances within five days, resolve the grievance within 30 days, and send a written resolution to the member.

L.A. Plan, with more than 2.5 million members in Los Angeles County, was fined $35 million by DMHC and $20 million by DHCS after regulators identified thousands of violations of the plan's handling of enrollee grievances, the processing of requests for authorization, and inadequate oversight and supervision of its contracted entities regarding timely access.

L.A. Care had self-disclosed to DMHC in 2021 that it had identified more than 67,000 instances where the plan failed to timely respond for several of its business lines, including Medi-Cal. L.A. Plan self-reported 41,500 violations to from January 2019 through October 2021.

L.A. Care also self-disclosed that it had a backlog of 9,125 authorization requests to the DMHC and 8,517 to the DHCS for a three-month period in 2021. State regulators also identified 92,854 instances in which prior authorization requests were not processed timely from January 1, 2019 through October 13, 2021.

L.A. Care said that -- based on a review of penalties assessed of other healthcare organizations – "these proposed penalties are several times higher than what would be in alignment with previous state sanctions."

"What the state does not seem to factor into their equation is that a financial penalty of this magnitude creates yet another financial hurdle for a public health plan that is a crucial part of the health care safety net in Los Angeles County. L.A. Care is already striving to meet the needs of low-income county," the plan said.

Baass acknowledged L.A. Care's cooperation in the audit, but added that "the scope and breadth of its violations indicate deep-rooted, systemic failures that threaten the health and safety of its members. Our actions today send a strong message that California will hold L.A. Care accountable for providing quality care to its members.”