Big Dental Plan Cheats the Poor, State Audit Says

In a withering audit report, the state Department of Health Services has accused California’s third-largest dental plan of practices that have effectively cheated thousands of indigent Medi-Cal enrollees out of proper care.

The audit--prompted by a whistle-blowing former employee--cited DentiCare for denying some Medi-Cal recipients access to dental care, needlessly delaying care to others and improperly diverting fees from dentists into the company’s coffers.

The case is significant because the structure of DentiCare--a prepaid health maintenance organization emphasizing preventive care and low cost--is a likely model for federal reforms in health care delivery. Some critics contend that the case exposes fundamental flaws in the way managed care operates, with lax regulation and warped financial incentives creating the potential for neglect or abuse of the medically needy.

The Department of Health Services is moving aggressively to shift up to half of California’s 5 million Medi-Cal patients out of expensive fee-for-service arrangements and into managed care. The allegations against DentiCare are a setback to those efforts.

In the June 16 audit report, the Department of Health Services called upon Cigna Healthplan of Southern California to drop Laguna Niguel-based DentiCare as its dental services subcontractor. Cigna holds the prime health care contract for 112,000 Medi-Cal recipients in Los Angeles County.

Cigna has until June 30 to respond to the audit report. A company spokesman said Cigna was studying the report and would withhold immediate comment.

A lawyer for DentiCare’s corporate parent, Foundation Health Corp. of Sacramento, said that the report “basically talks about the past” and that DentiCare has made significant improvements since Foundation acquired the company in late 1991.

DentiCare derives about one-quarter of its revenue from Medi-Cal and the rest from 340,000 commercial enrollees, including government workers.

The audit disclosed that of the $6.9 million that the state paid under the Medi-Cal dental contract in 1992, Cigna took $753,000 off the top for administration and marketing expenses. DentiCare retained $3.2 million--46% of the total--for administration, marketing and quality assurance, the report said. DentiCare disputes that figure.

Only $2.97 million, or 43%, trickled down to the dentists for care of patients, the report said.

The audit notes that state regulations consider 15% an acceptable ratio for overhead costs, meaning that 85% is supposed to go to patient care.

“These people . . . the only word I can use to describe them is gluttonous,” said Dr. Jerry Malleus, a dentist whose large practice in San Fernando handles many DentiCare members.

Malleus said he has frequently fought DentiCare for approval of routine procedures, encountering “huge time delays and rampant denials” of treatment for no good reason.

The audit’s other findings include:

* High dentist turnover made DentiCare’s network unstable. Between January and June, 1992, the network dropped from 167 to 53 providers, “with certain geographical areas not covered at all.”

* DentiCare took eight to 12 weeks to respond to requests for treatment authorization. The audit suggests the process should take seven days. Slow authorization was a prime reason that dentists cited for quitting the network.

* As of June, 1992, about 66,000 Medi-Cal recipients--most of them children under age 6--were not assigned to dentists. That means that DentiCare was holding onto the full $5.35 monthly capitation fee that the state paid for each Medi-Cal member instead of deducting reasonable expenses and passing the money on to the dentists as required. For the full year, 24% of recipients were unassigned.

If a member does not have a valid assignment to a dentist, the dentist is under no obligation to provide care when the member arrives at the office.

Managed care, much favored by federal health reformers, differs from the traditional fee-for-service approach in the way the providers are paid. Under pure managed care, instead of getting a fee for each tooth extracted or each cavity filled, a dentist receives only the capitation fee, a set monthly payment for each person enrolled in the plan, regardless of whether the person visits the office.

The idea is to remove the financial incentive for performing unnecessary care. Because the provider is paid only the flat monthly fee, there’s no profit in running extra tests, taking extra X-rays, drilling healthy teeth, etc. But the other side of the coin, critics point out, is that the incentives under managed care reward providers who do nothing, even when care is needed.

The state’s investigation of Cigna and DentiCare arose from a campaign by a dentist who served until March as DentiCare’s chief quality assurance officer.

The dentist, Margaret J. Rozbicka of Huntington Beach, has contended in interviews and in a lawsuit she filed against DentiCare in April that the company fired her because she complained too loudly about policies that she said resulted in poor quality, long delays and widespread denial of treatment. DentiCare’s motion to dismiss the lawsuit is pending.

Rozbicka, who oversaw DentiCare’s network of 1,500 primary and specialist dental offices, said that in her last year there, she fought constantly with her boss, DentiCare Chairman Dr. Carl E. Bozzo.

In one July, 1992, incident, after Rozbicka had been pressing the executive to drop certain poor performing dentists from the network, she said that Bozzo, a heavyset six-footer, stormed into her office and pounded her desk with his fists, screaming at her using foul language.

The outburst was in marked contrast to Bozzo’s demeanor when he hired Rozbicka in 1990, Rozbicka said. Initially, Bozzo supported her efforts to build a stronger quality assurance operation, she said.

Rozbicka’s first priority was to prepare for an extensive state audit scheduled for spring 1991. Under California’s groundbreaking Knox-Keene Law, passed in 1975 to rid the state of shady health care practices, the Department of Corporations became the primary regulator for HMOs and other styles of prepaid health plans. The Department of Health Services gets involved when Medi-Cal patients are concerned.

The Department of Corporations usually conducts a full audit of health plans every three or four years. DentiCare’s previous audit, in 1987, had disclosed some deficiencies, and Rozbicka said her superiors wanted to make sure that the plan had no such trouble in the upcoming audit.

But once the 1991 audit was completed and DentiCare had passed, support for Rozbicka’s operation began to dwindle, she said. Her concerns about long delays in approving treatment and in assigning plan members to dentists started to be ignored.

Rozbicka associated the change in attitude with DentiCare winning the large Medi-Cal contract with Cigna, which was signed in early 1991. Until that time, DentiCare had not been involved in Medi-Cal. After teaming up with Cigna, DentiCare added about 35,000 Medi-Cal recipients in Orange, San Bernardino and Fresno counties through a subcontract with Tower Health Services.

The Medi-Cal contract became the source of most of the complaints.

“We received a lot of noise from providers,” Rozbicka said.

In 1992, not long after the office confrontation with Bozzo, Rozbicka approached regulators at the Department of Health Services and Department of Corporations and began passing on information.

As a result, the Department of Health Services began its audit in November. The Department of Corporations has also launched an investigation that is not complete, according to Richard Murakami, assistant commissioner.

Some critics say the Department of Health Services audit report is good as far as it goes, but it does not address how such problems could be prevented in the first place, especially after managed care becomes more widespread.

Michele Melden, staff attorney with the National Health Law Program, a public interest legal program that often represents Medi-Cal recipients, said: “State enforcement is really weak.”

The problem with capitation programs, she added, is that “if you don’t provide care, you’ve got a built-in profit and if you do provide care, it may cost you more time or money than you’re compensated for--so there’s a built-in conflict of interest in the provider-patient relationship.”

When DentiCare was sold to Foundation for $24 million, Bozzo, who with family members controlled more than half the stock, was a principal beneficiary.

DentiCare, for its part, charges that Rozbicka’s accusations stem from that transaction.

Darryl Mansfield, a lawyer for Foundation, said Friday that “Margaret Rozbicka is a former employee . . . who became upset because she didn’t get stock options when DentiCare was acquired.”

It was her disgruntlement over not cashing in on the takeover along with other DentiCare managers that led her to pursue her grievances in court and with state regulators, Mansfield said.

“That’s absolutely outrageous,” Rozbicka said Friday. “We never spoke about any compensation whatsoever.”