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Blue Shield, CenCal Health Trade Accusations Over Lawsuit Alleging Medi-Cal ‘Patient Dumping’

A lawsuit filed by Blue Shield of California claims that CenCal Health engaged in a patient “dumping” scheme to avoid paying for the care for some of its sickest clients — including those in need of kidney transplants, and those with compounding ailments such as HIV and hepatitis — by signing them up for Blue Shield insurance plans instead of covering the costs of treatment out of its own revenue.

CenCal Health, formerly known as the Santa Barbara San Luis Obispo Regional Health Authority, is a Medi-Cal managed care provider to about 180,000 low-income patients in Santa Barbara and San Luis Obispo counties who qualify for the state Medicaid welfare program.

CenCal denies the allegations, saying it paid the patients’ monthly Blue Shield insurance premiums so they could afford private insurance.

In a statement to The Tribune on Wednesday, however, legal affairs director Caitlin Larsen said the nonprofit agency plans to discontinue the disputed program “for administrative reasons.”

In its lawsuit filed in San Francisco County Superior Court on July 11, Blue Shield of California accused CenCal Health of failing to perform its mandatory duties, unfair competition and unjust enrichment.

The federal Patient Protection and Affordable Care Act states that patients cannot be denied coverage because of pre-existing medical conditions, and CenCal Health’s contract with the state requires it to assume “total risk” for providing Medi-Cal-covered plans to its members.

In exchange for assuming that risk, CenCal receives monthly payments from the state Department of Health Care Services to treat its patients.

The suit alleges that CenCal improperly kept those payments even though Blue Shield was covering the cost of care for those patients. It also accuses CenCal of encouraging physicians to participate in the Blue Shield “scheme,” because they would get higher reimbursement from the insurance company for their services.

“CenCal actively marketed its scheme to medical providers, brokers and current and prospective CenCal members, in an effort to move some of its sickest members to Blue Shield,” the complaint reads.

“In its marketing materials, it encouraged providers to identify patients with high-cost medical conditions for the CenCal scheme by telling the providers they would benefit financially from it, in that private plans like (Blue Shield of California) pay higher rates than CenCal pays.”

CenCal’s program resulted in about 40 of its members being enrolled in Blue Shield health plans, 21 of whom are still in those plans, the lawsuit states. Blue Shield claims it has paid about $11 million to treat the 40 patients since 2014.

All but one of the patients are from Santa Barbara County.

Blue Shield, however, says the program has been in place since 1990 with the “full knowledge” of the state Department of Health Care Services.

In an email sent Wednesday, Larsen denied any wrongdoing by CenCal and said the allegations in the lawsuit are false. She also said the premium-payment program was “winding down for administrative reasons” and would end Aug. 31.

CenCal will pay the premiums for the 21 affected members for coverage through August. Those patients will then shift back to CenCal.

“We’ve been operating a beneficiary premium assistance program since 1990, with full knowledge of DHCS,” Larsen’s statement reads. “The program is legal and consistent with our mission. Blue Shield has accepted premium payments from us under this program for many years and only recently has raised issues about it.”

Larsen’s statement calls Blue Shield’s allegations “false and unfounded” and said CenCal’s attorneys are confident they can prove it in court, should the lawsuit proceed.

“Blue Shield sued us as a way of illegally kicking these members off their own plan by trying to send back our payments and calling our program illegal,” Larsen wrote in a follow-up email.

Steve Shivinsky, a Blue Shield of California spokesman, said Wednesday that the lawsuit remains ongoing, and the insurer is now considering its legal options given CenCal’s pledge to end the practice.

“(CenCal) was never authorized to do this kind of program in the first place,” he said. “We’re evaluating what the next step may be.”

— Matt Fountain is a reporter for the San Luis Obispo Tribune. Contact him at [email protected] or 805.781.7909.

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