Attorney General Lockyer And Department Of Health Services Director Sandra Shewry Call For New Medi-Cal Computer System To Fight Fraud

Thursday, December 28, 2006
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(SACRAMENTO) – Attorney General Bill Lockyer and Sandra Shewry, director of the Department of Health Services (CDHS), today released a report prepared by the Attorney General’s Medi-Cal Task Force finding that the state’s decades old Medi-Cal computer system needs to be replaced to assist in effectively identifying and preventing fraud. The report also provides a three-step blueprint for state policymakers to modernize California’s 30-year-old Medi-Cal system that will result in improved quality of care for beneficiaries, timely payments to legitimate providers, and help prevent fraud estimated by some to be more than a billion dollars a year.

“Medi-Cal is the largest health care provider in the State of California, and therefore an attractive target for those interested in committing fraud,” Lockyer said. “If implemented, these recommendations can save hundreds of millions of dollars annually for California and also improve the quality of care received by the more than 6 million poor, aged and disabled who rely on Medi-Cal. I am grateful for the efforts of the task force members in tackling this statewide problem.”

“We were pleased that the Task Force recommendations outlined in this report validate the actions the Department of Health Services started in 2005 to move toward a new computer system to help combat fraud, waste and abuse in Medi-Cal,” said Shewry. “The Department of Health Services views any loss of Medi-Cal funds due to payment errors or fraud as unacceptable.”
“If you live in California, the second biggest chunk of your taxes goes to Medi-Cal,” said Dr. Greg Papadopoulos, chairman of the Medi-Cal Fraud Task Force and executive vice president and chief technology officer at Sun Microsystems. “The Attorney General's Office and the Department of Health Services both strive to ensure these program dollars - approximately $34 billion per year - are well spent and deliver effective healthcare services. It's been incredibly gratifying to recommend changes and technologies to combat Medi-Cal fraud and help California's most vulnerable citizens.”

More than 6.6 million Californians, including children, families, seniors and people with disabilities depend on Medi-Cal to meet their basic health and dental care needs. The Attorney General’s Medi-Cal Task Force was established by Lockyer in 2004 to assess California’s current Medi-Cal computer system. Each task force member is an expert in technology or information systems, and their initial charge was to use their expertise to recommend system modifications that would allow CDHS and the Attorney General to use a modern technology-based approach to detect and prevent fraud. After conducting an initial examination, the task force concluded that “the current structure of the Medi-Cal system is such that minor changes to the system will not yield significant improvements in either the ability to detect or prevent fraudulent behavior.”

The task force found that the Medi-Cal electronic claims system is typical of others created during the 1970s. It is designed primarily to expedite claims payments rather than prevent fraud and the system’s structure makes it difficult for regulators to extract fraud-related information. While substantial improvements have been made, it can take months, if not longer, for CDHS to identify fraudulent claims - giving criminals time to avoid detection and preventing quick identification of new fraud schemes. Further, the system lacks beneficiary-based health data that would allow medical professionals to provide better quality care to patients. In response to these findings, the task force report recommends implementation of three key reforms:

Measure the System. The current Medi-Cal computer system does not have procedures in place to accurately and continuously measure the amount and types of fraud being perpetrated. To address this problem, the task force recommends implementation of more sophisticated measurement methods to facilitate early detection of new fraud schemes or trends and also to accurately track reform effectiveness. The task force acknowledges that CDHS measures the Medi-Cal program annually to determine where it is at greatest risk for payment errors and to provide an estimate of the potential dollar loss to the program, including potential loss due to fraud and abuse. Utilizing these measurement tools will provide the data necessary to better quantify the scope of Medi-Cal fraud, make fact-based recommendations for further system improvements and monitor the changes that result from those improvements.

Replace the Medi-Cal Claims System. The computer system is based on 30-year-old technologies that prevent regulators and prosecutors from obtaining the information they need to quickly identify fraud and hold perpetrators accountable. The task force recommends that the computer system be put out to bid and replaced by one that utilizes up-to-date information technology allowing high-speed processing, use of data mining tools to identify fraudulent claims and prompt payment of legitimate claims.

Do Business Electronically. Finally, the task force recommends that Medi-Cal convert its claims operations to a paperless system in order to improve fraud detection, enhance public health and improve overall program efficiency. Combined with a modern IT claims system, electronic claim reporting will help regulators quickly identify fraudulent conduct and provide the Attorney General’s Office with the evidence it needs to successfully prosecute perpetrators. An electronic network also will improve patient care. For instance, physicians can make more accurate diagnoses when they have electronic access to a patient’s medical history, regardless of whether they’ve seen the patient before. Further, electronic requests for treatment can be authorized more quickly allowing for timely treatment prior to manifestation of more severe health problems.

In addition to Dr. Papadopoulos, members of the Attorney General’s Medi-Cal Task Force include: Dr. K. Mani Chandy, Simon Ramo Professor of Computer Science, California Institute of Technology; W. Joseph Majka, Vice President, VISA Fraud Control, VISA USA; Larry Singer, Senior Vice President, Strategic Insight Office, Sun Microsystems, Inc.; Dr. Harold Sorenson, Professor Emeritus, Department of mechanical & Aerospace Engineering, UC San Diego; Consuelo Woodhead, Assistant U.S. Attorney, Central District of California; and, Jason Woods, Director, Chief of Operations, Chief Technology Office, Sun Microsystems, Inc.

A copy of the Medi-Cal Task Force report can be found at the Attorney General’s website:

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