Santa Clara County wants to change its Medi-Cal model, but Family Health Plan calls it a “hostile takeover”

As House Republicans consider making deep cuts to Medicaid, Santa Clara County wants to transition to a “single plan” model for Medi-Cal managed care in hopes of improving reimbursement rates. But leadership of the Santa Clara Family Health Plan, a county-created public health agency, is pushing back, calling the move a “hostile takeover” in a recently filed lawsuit.

The change will require approval from the California Department of Health Care Services, and is expected to take several years. But at Tuesday’s Board of Supervisors meeting, the county took steps to facilitate the transition, with supervisors unanimously deciding to remove most of the existing governing board for the Family Health Plan, and install a new one that will be largely made up of county employees.

“There’s really an urgent need for an efficient unified and effective Medi-Cal strategy that can mitigate these cumulative impacts and support the stability of these critical safety net services,” County Executive James Williams said at the meeting. “Those run directly by our county organization, which again are the most significant in terms of volume and hospital care, but also community clinics and other critical Medi-Cal providers too.”

The Family Health Plan, created by the Board of Supervisors in 1995, was established as a separate entity rather than a county department because of the liability and fiscal concerns of operating a Medi-Cal managed care plan. But county officials said those worries never materialized, and that the separation has created “significant structural challenges” that have made it “difficult to maximize revenue for the local safety net healthcare system.”

The county, which operates the second-largest county-owned health and hospital system in the state, is heavily reliant on federal revenues related to Medicaid (referred to as Medi-Cal in California) and Medicare — public health insurance programs for low-income and disabled people, and those 65 and older.

The Family Health Plan also leans heavily on the county, according to a memo written by Williams, and delegates managed care responsibilities for roughly 60% of its 300,000 members to the county through the county-run Valley Health Plan. The Santa Clara Valley Healthcare system also provides hospital and specialty care services to the Family Health Plan’s remaining members, and to those on the private Medi-Cal plan that’s run by Anthem Blue Cross, further creating the need to move to a “single plan” model, the county said.

Supervisor Susan Ellenberg, at Tuesday’s meeting, said every dollar that’s “not reimbursed by our managed care plan is a dollar that must come from the county’s general fund,” which ultimately could impact other services.

“As a taxpayer I would want to know that my local government is maximizing efforts to capture state and federal funds before using local funds,” Ellenberg said. “As a Medi-Cal recipient, I would certainly want to know that my care isn’t compromised because my managed care plan has decided not to reimburse the cost of my care to the fullest extent possible.”

A number of local nurses and doctors offered support Tuesday for the transition to a “single plan” county. Dr. Praveen Anchala, a radiologist at Santa Clara Valley Medical Center and vice chair of the Valley Physicians Group, told supervisors that the move is “vital in removing a litany of bureaucracy and hurdles that physicians are jumping through every day to take care of our patients.”

But Family Health Plan executives and board members are vehemently opposed to the change. Christine Tomcala, the CEO of the Family Health Plan, told supervisors that the proposal “is frankly reprehensible.”

“It disrespects our governing board, our staff and most importantly our members,” she said. “These actions simply cannot be justified, not by promises of higher reimbursement rates or access to our reserves, and not by aspirations for a single plan county model. Because however desirable, none of these things can be accomplished without collaborating with Santa Clara Family Health Plan.”

Last week, the Family Health Plan filed a lawsuit against the county in Santa Clara County Superior Court, asking a judge to intervene and issue a temporary restraining order to prevent the county’s actions on Tuesday. In the lawsuit, the Family Health Plan argued that removing the board members would violate state law since it’s a “separate entity with its own separate fiduciary duties.”

A judge denied the request.

In a statement, County Counsel Tony LoPresti said the lawsuit has “no merit.”

“We’re pleased that the court did not intervene to stop the Board of Supervisors from properly exercising its policymaking authority to improve managed care in Santa Clara County,” he said.

A representative from the Family Health Plan declined to comment on the lawsuit.

Supervisors ultimately decided to include three current board members on the new governing board of the Family Health Plan — a recommendation made by Supervisor Margaret Abe-Koga.

“I do believe that together we can work towards a governance philosophy that ensures we are meeting the urgent and essential needs of our community,” Abe-Koga said. “I always place utmost value in community voices, especially when it comes to oversight rules of government.”

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