Relationships between Nonprofit Prepaid Health Plans with California Medicaid Contracts and for Profit Entities Affiliated with Them

HRD-77-4: Published: Nov 1, 1976. Publicly Released: Nov 1, 1976.

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This study outlines the relationship between nonprofit, prepaid health plans (PHPs) with California Medicaid contracts and for profit entities affiliated with them. Affiliated entities are those connected with the PHP by common directors, officers, and/or owners. The following five PHPs were studied: Consolidated Medical Systems, Ltd.; Harbor Health Services; Omni-Rx Health Care, Inc.; Family Health Program, Inc.; and American Health Care Plan, Inc. The following data are included in the report: (1) the names of the officers and directors of each of the five PHPs; (2) the names of the officers, directors, and shareholders (where possible) of the firms which subcontracted with these PHPs; and (3) the percentage of these PHPs' gross receipts which flow to each subcontractor. The California Department of Health (the State's Medicaid agency) has not provided the PHPs with regulations regarding subcontract format, nor has it prepared criteria for subcontract approval for use by its contract managers. The State has also not formally approved PHP subcontracts as required by State law. Although HEW requires prior approval of expenditures under all PHP contracts with values over $100,000, it has not required prior approval of PHP subcontracts. The contracts with the five PHPs studied had been approved by the HEW Regional Office. HEW plans to require that the State approve all PHP subcontracts prior to their taking effect.

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