California regulators demand 9 health plans terminate contracts with medical group

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The California Department of Managed Health Care has demanded nine health plans end their contracts with Monterey Park, Calif.-based Employee Health Systems Medical Group after a company affiliated with the medical group, Monterey Park-based SynerMed, was accused of improperly denying care to thousands of patients and falsifying documents to hide the scheme, according to the Sacramento Business Journal.

The allegations against SynerMed, which manages physician practices and administers managed care contracts, were made by a whistle-blower and summarized in an internal investigation report last year. According to the whistle-blower's report, a small team at SynerMed routinely falsified denial letters without supervision from physicians or other clinicians. The falsified letters were allegedly often written solely to satisfy auditors and were not sent to the patients.

Within two days of a decision to deny coverage for services, Medicaid managed care companies and commercial health plans are required to provide members with a written denial notice. The notice gives patients the ability to appeal the decision with their health plan and then with regulators. However, SynerMed's compliance department determined the company did not properly inform patients, leaving thousands of members unaware of their appeal rights. This may have caused members to experience delays in care or financial hardship.

In November, SynerMed said it was closing. At that time, SynerMed CEO James Mason said EHS Medical Group and another medical practice had already terminated their contracts with the company.

In the cease-and-desist order recently sent to health plans, the department of managed health care also alleges SynerMed blocked access to specialists by removing certain high-cost providers from the web portal used by primary care physicians to refer patients to specialists. The department alleges EHS Medical Group acted "through SynerMed" to reduce costs.

According to the Sacramento Business Journal, EHS Medical Group and SynerMed share the same headquarters and offices in three cities, and EHS Medical Group subcontracts to SynerMed for administrative and medical management services.

EHS denies knowledge of SynerMed's actions and expressed concern about the department of managed care's demand.

"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," an EHS Medical Group spokeswoman told the Sacramento Business Journal. "Uprooting them from their primary care provider or [specialist] is simply creating a problem where none exists."

EHS said in December that it is conducting an investigation into SynerMed's actions and is cooperating with the state's investigation.

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