CalOptima to reinstate Prime Healthcare hospitals back into its OC network

Orange County’s health insurance plan for the poor has agreed to reinstate contracts with four neighborhood hospitals owned by Prime Healthcare, restoring access for thousands of Medi-Cal patients there.

CalOptima Health, which administers Orange County’s Medi-Cal funding, had terminated contracts with Prime Healthcare two years ago, saying that Huntington Beach Hospital, La Palma Intercommunity Hospital, West Anaheim Medical Center and Garden Grove Hospital and Medical Center were underutilized by CalOptima members.

Last week, a divided CalOptima board allowed the four hospitals to return to the fold, giving them access to $30 million in Medicaid funding they otherwise would have lost and restoring service for patients that Prime says were left in the lurch, resulting in extra long wait times for care.

Prime described the hospitals as safety nets, serving the homeless and poorest members of the community. Without a contract, CalOptima members could still get serviced through the emergency rooms, but for further care would have to be transferred to hospitals in the CalOptima network. Now patients will have complete access.

“This decision is critical for patients. Without it, many could have lost access to care in their own communities, despite the voices of nurses, physicians and hundreds of residents who advocated for these hospitals and shared how vital they are to their families,” Prime spokesman Fred Ortega said. He added that the hospitals could ill afford to lose the Medicaid funding.

Leading the effort to reinstate Prime was county Supervisor Janet Nguyen, who sits on the 10-member CalOptima board and championed the move toward reinstatement.  Many of the hospitals in question are within her First District, which includes Cypress, Fountain Valley, Garden Grove, Huntington Beach, Los Alamitos, La Palma, Seal Beach and Westminster.

“I’m grateful that CalOptima reinstated four safety-net hospitals that provide vital services to our community. Tens of thousands of residents, including Medi-Cal patients, rely on these hospitals,” Nguyen said. “I want to work toward a policy and procedure that avoids removing providers like hospitals or doctors without a proper notice and appeal process.”

Supervisor Vicente Sarmiento, who also sits on the CalOptima board, abstained from the voting.

“While I am supportive of expanding access to care and I respect the decision of the majority of the board, I have questions that were not fully addressed regarding potential exposure for the health plan, so I could not support the action of the board,” Sarmiento said. He declined to elaborate.

“My goal going forward is to work with the board to consider better guardrails and oversight to ensure trust, confidence, and compliance from all of our network providers.”

Prime Healthcare has had problems in the past with its Medicare claims. In 2018, Prime and its CEO, Prem Reddy, agreed to pay $65 million to settle federal accusations that 14 hospitals in California submitted false claims to Medicare by admitting patients who actually required less-costly outpatient care. The hospitals also were accused of billing for exaggerated patient diagnoses, a process called “upcoding.” Reddy’s share of the settlement was $3.2 million.

Ontario-based Prime operates 44 hospitals nationwide. CalOptima has 954,000 members, making it the largest health insurer in Orange County. Its contract with the four hospitals had been in effect for more than 15 years.

CalOptima Chief Executive Officer Michael Hunn has cited underutilization of the hospitals as a chief reason for the termination of Prime’s contract. Most of the patients were going through the emergency room and not using regular inpatient/outpatient services.

From Dec. 1, 2022, to Nov. 30, 2023, 15,604 members accounted for 26,290 visits to the four Prime hospitals, with 98.6% being emergency room visits, according to data collected by CalOptima. Many members went to the ER more than once. There were 2,800 CalOptima inpatient admissions and 364 visits for elective care at Prime hospitals during the year.

Additionally, CalOptima delegates the care of approximately 750,000 members to large, managed-care medical groups, but there is no evidence that Prime contracted with any of those providers.

Seven other CalOptima hospitals within five miles of Prime facilities can absorb patients, CalOptima’s Hunn told the Southern California News Group in 2024, adding that the termination of the contract should have little impact on patients.

But Prime Healthcare officials told a different story, that patients sometimes had to wait for days to get transferred to a network hospital.

In some cases, Prime officials said, patients have reportedly left Prime hospital emergency departments, against the advice of doctors, with untreated medical conditions due to lengthy transfer wait times.

Besides reinstating the Prime contracts, the CalOptima board directed its counsel to settle lawsuits filed by Prime over unpaid claims.

©2026 MediaNews Group, Inc. Visit ocregister.com. Distributed by Tribune Content Agency, LLC.