Judge Reinstates Medi-Cal Funding


Last updated 10/18/2022 at 10:23am

Bankruptcy Judge Laura Taylor told the state Department of Health Care Services (DHCS) that it cannot permanently suspend Medi-Cal payments to Borrego Health, and advised Managed Healthcare Plan providers to halt any future transfers of Borrego Health patients to other clinics, and reverse any existing transfers. The decision was made at a hearing on Oct. 6, 2022 in the US Bankruptcy Court Southern District of California, San Diego, California.

According to Borrego Health attorneys, “Restoring Medi-Cal funding was critical to Borrego Health’s ability to fund restructuring of its debts and fulfill its obligations under the recent Chapter 11, Bankruptcy filing.”

Rob Bonta, California Attorney General, representing the state health department, claimed suspension was appropriate under its policing functions, but the Judge disagreed based on Sec 362(a) of the federal bankruptcy code.

DHCS threatened to cut off Medi-Cal funding, the primary health insurance for people that cannot afford private health care plans. Dental insurance funding, Denti-Cal, which was suspended in 2020, has not been lifted, following the October FBI/DOJ raid of Borrego Health offices and dentists accused of fraud, including Premier Healthcare Management, owned by Daryl Priest of El Cajon.

According to Dan Kramer, publicist for Borrego Health, “The Judge’s ruling was based on concerns over the impact on patients by the proposed payment suspension and patient transfers.” According to court documents, Borrego Health currently has 92,000 patients and 700 plus pre-filing employees.

In a previous emergency motion, the Judge authorized continued employee payroll and benefit funding.

“Borrego Health remains committed to ensuring access to quality healthcare services for the at-risk-patients and communities that depend on us. The Bankruptcy court ruling will directly help Borrego Health’s patients access the critical care they need and deserve,” reports Kramer. “We are proud to continue providing care to these patients and grateful for the Court’s ruling.”

At the same time, a Managed Care Plan, Blue Cross, concerned about their members, had begun to move them to other FQHCs.

According to court documents, Borrego Health accused DHCS of slandering the non-profit and implying that Managed Health Care Plans should begin transferring their patients in a press release. This press release, explaining why DHCS was discontinuing Medi-Cal payments to Borrego Health, and its media coverage, the attorneys explained, was the source of the problem.

Thousands of pages of legal arguments from both sides have been flying across the Judge’s desk in a matter of days.

Borrego Health’s list of attorneys keeps growing, and so does the expense. Someone once said, “major bankruptcies are an attorney’s wet dream.”

Take away the arguments by all the learned Esquires, and points of law, as well as court precedent, and the real answer for Judge Taylor’s ruling is obvious.

Judge Taylor, in an emergency order, the first, in fact, was to guarantee that Borrego Health could continue paying salaries and benefits for 700 plus employees.

Borrego Health in numerous pleas stated, “without the constant infusion of Medi-Cal funds, it would not be able to follow through with the Chapter 11 restructuring, pay off debts or continue to provide ‘quality of care’ for its 94,000 patients.’”

Of course, the Judge had to order DHCS to keep Borrego Health on Medicaid’s life support funded by taxpayers. How else to pay the employees needed to provide “the quality of care Borrego Health patients need and deserve.”

Remember it is the employees that provide the care. Many employees, including doctors, have expressed concerns to the Borrego Sun that they are, “failing their patients as a result of Borrego Health’s previous leadership and the continued legal and financial chaos.”

Medi-Cal, even without dental coverage, is more than 44% of the organization’s income. With dental insurance, it was 88 percent. However, DHCS suspended dental insurance permanently based on the investigation into massive fraud by private contractors.

This leads to another gripe of Borrego Health’s attorneys. They claim that Borrego clinics continued providing dental care through the in-house dentists without government insurance. Pointing out that the in-house operated dental services were not included in the dental fraud investigation. And, in fact, according to Borrego Health attorneys, DHCS owes them $6.7 million for this charitable act on behalf of their patients.

The winning argument was, “DHCS was only worried about their share of the debt and getting a better deal than the rest of the creditors, or obtain an advantage over other creditors or potential creditors in the bankruptcy proceedings.”

“The suspension also would remove critical decisions about the bankruptcy that belong to the Court,” stated Judge Taylor, in making her decision to choose the “Pecuniary Purpose” explanation, rather than a “Public Welfare,” policing power argument, which DHCS has. Thus, denying the suspension of Medi-Cal.

“The department (DHCS) appears to fail the public purpose test,” Judge Taylor noted in her order. “Suspending millions of dollars in potential payments regardless of whether any alleged fraud exists, clearly protects the department’s pecuniary interest in the funds. Those funds are meant to pay the debtor for services rendered and will contribute to any Chapter 11 plan to repay creditors.”

What is confusing is that the rest of the creditors are owed money for goods and services, DHCS is the only creditor owed millions of taxpayer dollars, and is now mandated to pay millions more. The banks, insurance companies, utilities, and other creditors needed to keep Borrego Health operating were stayed by the Judge from denying the non-profit credit. Indirectly, yes, they are contributing a monetary benefit, but these creditors are private enterprises, and not paying out millions more taxpayers’ cash throughout the bankruptcy. Money that will never be recovered. The thing about Bankruptcy court is that in most situations the judge has the final say, although everyone has the right to argue their case.

Isn’t protecting taxpayers’ investments in health for the less fortunate- young and old- the government’s job? When an organization has shown a history of disregard for public funds by multiple scams to siphon off tens of millions for the personal benefit of officers, trustees, friends and family, wouldn’t DHCS be justified in not trusting it? Particularly, when according to the Department, Borrego Health was not able to live up to its obligations under the Corrective Action Plan (CAP) imposed following the FBI/DOJ raid.

With cross complaints, hotly contesting each other’s position, Borrego Health and the Department of Healthcare Services seem at odds on every issue. But Borrego Health attorneys argue the Corrective Action Plan (CAP), that DHCS and the court-appointed monitor are saying Borrego Health had failed to implement in 17 months, was “unfair,” “too rigid,” and “exceeded health and welfare standards.” At the same time, Borrego Health attorneys and CEO Rose Maclsaac, argue that Borrego Health was doing a great job of meeting the CAP goals. Adhering to the plan was the outcome DHCS gave the organization to continue receiving Medi-Cal funds. DHCS says “Borrego Health failed.” Borrego Health says, “Not so,” in thousands of pages of legal briefs.

Borrego Health contends it had done everything possible to comply: filed suit against Daryl Priest’s inflated rental agreements; sued its own officers, Trustees, friends and family for illegal activities, breaking FQHC and other federal Healthcare regulations, lying to the IRS, and committing racketeering, money laundering, and more. The Trustees also claim they are doing everything to get their act together – firing incompetent officers, and the removal of the bad apples from the Board of Trustees, and administration.

One of the complaints by Borrego Health was the cost of the CAP monitor, who, according to unconfirmed rumors, was being paid $990, rounded off to $1,000 an hour. The Trustees wanted to be free of the cost of the monitor, with a bill over $20,000; but when Borrego Trustees asked DHCS for relief according to Borrego attorneys, the Department did not respond to the request.

According to a response from the Department of Public Health to a Borrego Sun inquiry, “The California Department of Public Health (CDPH) Centralized Applications Branch reviews and processes changes of ownership applications for licensed health care facilities or clinics. The bankruptcy court approves the sale of assets in a Chapter 11 case.

“Clinics are required to apply to CDPH for prior approval regarding: Establishment of a clinic; addition of a special service to a licensed clinic; change of ownership; or change of license classification; or operation of a clinic at a new location.”

On August 19, 2022, DHCS required Managed Care Plans (MCPs) that have provider contracts with Borrego Health to submit transition plans to DHCS that explain their strategies for ensuring continuity of care for Medi-Cal members assigned to Borrego and transitioning those members to other providers, if MCPs were to terminate their provider agreements with Borrego Health, or the organization was to cease operations. All MCPS submitted requested plans, which DHCS analyzed to evaluate their ability to provide continued access to covered services. This requirement is not only law, but a requirement of the contract between DHCS and MCPs.

The transition plans by eight MCPs indicate how many Medi-Cal members can be reassigned within the time or distance standards, which are designed to ensure that providers are available within a specified time or distance from a members’ home.

While time or distance standards may vary, depending on the provider type and population density of the county, the standards require that primary providers and pharmacy providers be within 10 miles or 30 minutes from any member’s residency, regardless of the county.

Of Borrego Health’s, 94,000 patients, collectively, the MCPs identified approximately 58,727 Borrego Members, in Imperial, San Diego, Riverside and San Bernardino Counties. The MCPs assigned to Borrego Health, and the proof of protection and continued care provided to DHCS are as follows:

Inland Empire Health Plan (IEHP) with the most members assigned to Borrego Health at 33,900 Medi-Cal members. IEHP indicated it was in discussions with Riverside University Health System (RUHS) and SAC Health (SACH) to potentially absorb any impacted members. IEHP also confirmed to DHCS that if there are no brick-and-mortar clinics available, it would utilize a mobile clinic in the interim, while looking for available space to lease. It also confirmed that RUHS and SACH would have the resources to operationalize mobile clinics in the rural areas while searching for permanent space. The mobile units would be placed adjacent to the Borrego Health clinic from which members were transitioning. IEHP also stated that it would be able to provide timely access to specialty services for former Borrego patients, such as mental health, women’s health and transgender services, and infectious disease services.

Molina Healthcare (Molina) has approximately 8,381 Medi-Cal members and 197 receiving mental health and other specialty care assigned to Borrego Health in Imperial, San Diego, San Bernardino, and Riverside Counties. Molina in its transition plan confirmed that contingency providers, such as Clinicas de Salud del Pueblo Inc., Neighborhood Healthcare and Integrated Health Partners (IPA/Group), could be leveraged to reassign Borrego’s membership with no impact to members and access to services.

Aetna Healthcare, has 458 Medi-Cal members assigned to Borrego Health in San Diego County. Of that number, 441 could be assigned to a new provider, meeting the time and distance requirements. The 17 members that may experience distance considerations, are assured Aetna would provide the necessary transportation. Other FQHC systems in that region that own/operate multiple clinic sites include: San Ysidro Health Center; La Maestra; Neighborhood Healthcare; Integrated Health Partners, and Family Health Centers.

Blue Shield of California (Blue Shield) did not anticipate any interruptions for Medi-Cal members’ access to services. Blue Shield would be able to transition members to participating provider groups within the time and distance requirements. There are 1,505 Blue Shield members assigned to Borrego Health. Plus, there are 17 CalMediConnect members. CalMediConnect is a program that coordinates care for those who qualify for Medicare and Medi-Cal. Blue Shield agreed to provide transportation to the 44 members to primary care physicians that would be outside the time and distance requirements.

Community Health Group (CHG) has 11,496 Medi-Cal members assigned to Borrego Health in San Diego County. Of its 11,496 members, 11,463, if reassigned from Borrego, would receive timely access to necessary medical care within time and distance standards through already established contracted providers at their sites or through telehealth. CHG reported it did not perceive any adverse effect to members’ access to covered services if its Borrego-Health members were reassigned. CHG has set up a Transition Task Force team to coordinate and facilitate continuity of care for members currently assigned to Borrego who live outside the time and distance standards.

Health and Wellness Plan (CHW) has 803 Medi-Cal members in Imperial County that are assigned to Borrego Health. All members could be assigned from Borrego Health to a new primary care provider within the time and distance standards.

Health Net Community Solutions, Inc. (Health Net) has 777 Medi-Cal members in San Diego assigned to Borrego Health. Of that figure, 773 members could be reassigned successfully. For the remaining four, Health Net’s Member Services Department will individually contact each member to discuss transitions and PCP options.

United Health Care (UHC) has 823 Medi-Cal members in San Diego assigned to Borrego Health. They report that 822 members could be assigned a new primary care provider with time and distance constraints. UHC noted that transportation would be provided to any members outside of time and distance standards.

Reading the DHCS document seems to support Borrego Health’s accusations that these plans are only words on paper, lacking specific details, and reiterating that Borrego Health is the only real salvation MHP’s have.

However, DHCS stated, “Give us more time, and we will support our plan in detail.” Regardless of the details, or who’s right or wrong, patients will suffer and have suffered, because of Borrego Health’s 10-year spending and stealing spree. Also, because the state regulatory agencies didn’t do their job, and the state Dental Board protected rogue dentists and gave dental licenses to dentists with shady backgrounds.

It appears the issue is moot now as the Judge has ordered such transitions to stop. The real truth about California’s health care system isn’t as simple as Borrego Health stated, “The DHCS/MCP plans are inadequate in detail and without more specifics, can’t possibly guarantee access to quality primary care.” The reality is, the state’s healthcare system is a patchwork of funding, promises, complex rules and regulations, that really don’t serve the less fortunate, real people, in either preventive, physical or mental health care.

So, when DHCS says, “they can work with the MCPs to meet their members health care needs,” it’s with a “wink, wink.” Same for Borrego Health, with its new message about “Continuing the quality of primary care our patients need and deserve.” “Wink, wink.”

All Borrego Health bankruptcy documents can be viewed at https://www.kccllc.net/BorregoHealth