State Auditor Releases Report of the Audit of the California Department of Health Care Services

On August 20, 2015 the California State Auditor released their report entitled “California Department of Health Care Services: It Should Improve Its Administration and Oversight of School-Based Medi-Cal Programs.” This report is the result of the state audit approved in August of last year (2014) by the Joint Legislative Audit Committee related to their administration of both the school MAA and LEA Billing Option programs. Overall their findings fall into three main categories:

  1. a cost-saving opportunity was missed by not implementing a statewide quarterly time survey when they implemented the random moment time survey methodology in January of this year,
  2. there were missed opportunities to maximize federal funding available for California,
  3. concerns were raised over the value that the local educational consortia (LECs) and the local government agencies (LGAs) added to the review process of the reasonableness test criteria.


Below is a summary of the key findings and recommendations laid out for California’s Department of Health Care Services (DHCS).

Key Findings and Recommendations

Reasonableness test criteria. It was determined that the criteria review process (from October 2013 through October 2014), while reasonable, failed to result in the approval of many deferred claims prior to its cancellation. They found that the criteria were not always accurately communicated to stakeholders and that incorrect criteria were sometimes used when reviewing submitted claims.  As a result fewer than 10 percent of the claims submitted by claiming units were approved.

Appeals. The current appeals process only allows claiming units to appeal actions and decisions made by their local educational consortia (LEC) or local government agencies (LGA) and not those made by DHCS.

Recommendations. Develop regulations to establish a formal appeals process allowing claiming units to appeal decisions made by DHCS directly.

Oversight. DHCS has not conducted site or desk reviews of LECs and LGAs and the State Auditor found that the contracts between these entities and their claiming units contain potentially problematic provisions that should be overseen by DHCS.  As the state agency responsible for the program it is the responsibility of DHCS to provide adequate oversight, which at this time, it is not doing. In addition to not overseeing the LECs and LGAs, DHCS does not track in any way the administrative fees that claiming units pay.  This means they cannot ensure that these fees are reasonable and necessary – criteria needed to make them allowable under federal regulations.

Recommendations. DHCS needs to update its site review and desk procedures to ensure verification that LECs and LGAs are meeting their oversight and administrative responsibilities and that they do not include provisions the could result in disallowed costs.

Excessive Cost. The report estimates that DHCS could save as much as $1.3 million annually in coding costs alone by switching to a single statewide quarterly time survey rather than the nine quarterly time surveys currently conducted under the newly implemented random moment time survey methodology.

Recommendations. Implement a single statewide quarterly time survey, including the change to all activities related to the time survey.

Maximization. One of the audit objectives was to determine whether DHCS maximizes the amount of federal funding available to California under these programs.  In the review of fiscal year 2011/12 they found that 27 percent of claiming units did not participate, which is a loss of nearly $10.2 million in federal reimbursements.

Recommendations. Develop and implement an outreach program to maximize participation among claiming units throughout the state in the administrative activities program.

Translation Services Rate. From February 2009 through June 2015 DHCS did not allow claiming units to claim reimbursement for translation services at the federally allowable rate of 75, but rather at only 50 percent.

Recommendations. Revise reimbursement rates to reflect what federal law allows and ensure that this information is distributed fully to claiming units.

DHCS did provide some responses and prepared action plans to some of the findings and recommendations detailed in the plan.  The final page is a final response from the State Auditor to DHCS regarding some of those plans and their respective timelines.

Read more

View the full California State Auditor Report…

View our Issue Analysis on the Federal Deferral of California’s School MAA Claims…

Visit the California State Auditor website…