State’s Health Plan Review Criticized : Medical care: Study says officials did not penalize those that gave poor care, resulting in a lack of improvements. Providers dispute the findings.

California health plans with a history of poor care have not been penalized or forced to make improvements, according to a report card issued Monday on HMOs and other companies that treat Medi-Cal patients.

The study by the Center for Health Care Rights, partially funded by the Irvine Foundation, examined the state health department’s medical audits of seven providers since 1990, uncovering “serious quality of care problems” in six of them. In some instances, problems found in 1991 or 1992 either did not improve or actually worsened in subsequent years.

“The current monitoring system is not working as it should,” said Geraldine Dallek, the executive director of the Los Angeles-based organization. “The central problem . . . is that oversight activities do not appear to result in improvement in the continuity and quality of care.”

Officials at the California Department of Health Services countered that they have been “very aggressive in sanctioning plans with poor performance” and cited cases several years ago in which financial penalties were assessed against two providers.

Another company, Molina Medical Centers, which was included in the report card, was repeatedly cited during the last four years for significant deficiencies in its quality of care.

The Long Beach-based company with 40 clinics statewide won its HMO license in March from the Department of Corporations, whose officials had not read the critical state health audits.

The Times reported Sunday that Molina won a contract potentially worth $400 million in May, after listing state Sen. Diane Watson (D-Los Angeles) on its board of directors.

Watson, who chairs the powerful Senate Health Committee, acknowledged that she helped guide Molina officials during their licensing review and was unaware of the audits. She said the company may well have gotten its contract because her name was listed--without her permission--on the company’s board of directors.

Dr. C. David Molina, who owns the medical chain, denied misusing Watson’s name and said he never got any special treatment from the state.

State Corporations Department Commissioner Gary Mendoza said Monday that he was making inquiries to his staff to be sure that no improprieties occurred in Molina’s licensing review.

He said he would review the new HMO report card along with its suggestion that his department hold public hearings before granting companies an HMO license. He said he recently implemented a recommendation that licenses not be issued until his staff has read a plan’s medical audits.

The report card concludes that state health officials have “failed to monitor adequately Medi-Cal managed care plans.”

“When the care is of poor quality, California taxpayers are not getting their money’s worth and poor mothers and children are being denied the medical services to which they are entitled,” the report said.

The report urges state health officials to adopt a “three strikes” policy to terminate contractors whose quality of care is rated deficient for three consecutive years. Financial penalties should be imposed on plans that fail to make corrections as pledged, the report said.

Health officials pointed out in response that they fined one plan $17,000 in 1986 for marketing violations in enrolling new patients and fined another plan $295,000 in 1989 for poor quality care.

Dallek said her report will be sent to the Legislature, where Assembly Health Committee consultant Paul Press said it may well prompt the state to collect data for its own HMO report.

In the Senate, Dallek said, the report will be directed to the attention of the health committee chaired by Watson.

“She chairs the legislative committee from which consumers would hope to get oversight and relief,” said Lourdes Rivera of the National Health Law Program, which has accused Molina of a track record of poor care. But Watson’s connection with Molina now “places consumers in a much weakened position,” she said.

Common Cause Executive Director Ruth Holton said there is a need for new legislation prohibiting lawmakers from serving on the board of companies doing business with the state.

Watson has denied that she gave permission for her name to be listed as a board member and claims that she resigned as soon as she discovered last spring that she had been put on the board. Her letter of resignation was dated about four months later, on Aug. 29.

While she was on the board, Molina received a no-bid contract from state health officials that is potentially worth more than $400 million during the next three years. Health official Joseph Kelly said his department did not know of Watson’s connection with Molina. He said the department is required to contract with any qualified, licensed HMO that accepts the department’s non-negotiable reimbursement rate.

Since the contract was awarded, the Department of Corporations has conducted its own audit of Molina’s medical care. In a confidential report dated Sept. 1, auditors accused the company of systemically denying necessary medical care to its patients to boost its profits.

Officials said financial concerns do not drive medical decisions. They said the company’s medical care is not accurately reflected in state audits that sample only a small percentage of the clinics’ patient files.