State Lifts Enrollment Ban on Universal Care

Less than two months after announcing a rare crackdown on Medi-Cal marketing fraud, state regulators have quietly lifted an enrollment ban on a Southland HMO that allegedly offered doctors kickbacks for enrolling Medi-Cal patients.

State officials confirmed Tuesday that Universal Care, a Medi-Cal health maintenance organization that serves roughly 80,000 Medi-Cal recipients in Los Angeles, Orange and San Bernardino counties, was permitted to resume enrolling new members as of May 14.

Health-care advocates, who applauded the state Department of Health Services for imposing the ban in March, blasted the state’s decision to lift the freeze so quickly. Advocates for the poor have frequently complained that the state is insufficiently monitoring fraudulent marketing in the Medi-Cal program and is too slow to act to stop abuses. When regulators have stepped in to halt abuses, these advocates contend, they have imposed only the slightest penalties.

The seven-week freeze on Universal’s enrollment is “a slap on the wrist that sends the health plans a very clear message that they can do business the way they want with very little interference from the state,” said Jeanne Finberg, a staff attorney with Consumers Union in San Francisco.

But a state Health Services official strongly disputed that contention. “Universal couldn’t enroll for two months,” said Vivian Auble, chief of Los Angeles County operations for the department’s managed-care division. “Do you know how much money that cost them? That’s a little more than a slap on the wrist.”

State officials said they lifted the ban after conducting a weeks-long audit of the company’s marketing procedures and ordering Universal to toughen its monitoring of marketing activities and to retrain its sales employees, he said.

Even so, Signal Hill-based Universal Care for now has dodged what could have been far worse trouble.

Tougher sanctions could have threatened the small HMO’s plans to become a major player in the Los Angeles County Medi-Cal program as a subcontractor to Foundation Health Plan, a large HMO that last year won a multibillion-dollar state contract for the county program.

Foundation had warned Universal it would be dropped from the lucrative contract unless it ironed out its differences with the state. Universal has said the contract could more than double its Medi-Cal enrollment to as many as 200,000 members.

Lawyers for Universal responded to the enrollment freeze by suing the state. Jay Davis, Universal’s executive vice president, said Universal will now drop the suit.

“The plans get legal opinions quickly and put a lot of money into intimidating the state,” said Consumer Union’s Finberg. “I wish the Medi-Cal beneficiaries had high-priced legal counsel to get their complaints aired when things happen to them.”

Universal has been frequently criticized by advocates for the poor for its aggressive marketing practices. Its latest problem surfaced in late March, when the Health Services agency alleged that a Universal vice president had offered a San Diego-area medical group an illegal “bounty” of $25 for each Medi-Cal patient the group signed up. The offer was made to several San Diego County medical groups in letters sent in March by Marc M. Davis, a Universal vice president and son of Howard Davis, the firm’s owner and chief executive.

Moreover, agency officials said they had evidence that four Universal salespeople had misrepresented themselves as Medi-Cal employees and offered enrollees cash to sign up. The four salespeople were referred to authorities for criminal prosecution on misdemeanor counts.

Universal executives have said that Marc Davis’ letters were not authorized by his father’s company and that the offers were withdrawn before any payments were made to doctors.

Auble said the state could only have levied a fine on Universal for kickbacks if it had evidence that money actually changed hands. But the state apparently intervened before that happened.

“The doctors denied that that practice was ever implemented,” she said.

Auble said possible legal action stemming from the alleged kickbacks hasn’t been ruled out. She said her agency has turned the case over to the California Department of Justice for review. “I’m not sure where they are on that,” she said.

Universal has tried to repair the public relations damage with doctors and others. In a memo under Howard Davis’ name distributed in late March to doctors and Universal employees, Universal said the state’s actions “appear to be motivated by undue political pressure for more intense regulation of HMOs.”

Jay Davis, another son of Howard Davis, estimated that the enrollment caused the plan’s Med-Cal membership to drop by 2,000 members through normal attrition.

“We lost the opportunity to market for about two months,” he said.