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Department of
Health Services:
It Needs to Improve Its Application
and Referral Processes When Enrolling
Medi‑Cal Providers
April 2007
2006-110
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C S A
ALIFORNIA TATE UDITOR
ELAINE M. HOWLE DOUG CORDINER
STATE AUDITOR CHIEF DEPUTY STATE AUDITOR
April 17, 2007 2006-110
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the Bureau of State Audits presents its audit report concerning
the Department of Health Services’ (department) provider application and referral processes for California’s Medical
Assistance Program (Medi-Cal). This report concludes that because of recent policy and administrative changes,
the department’s Provider Enrollment Branch (branch) has seen a decrease in the number of applications it receives
from providers seeking to enroll in Medi-Cal; however, the branch does not process some applications within the time
periods specified in statute. For instance, during federal fiscal year 2006, the branch recommended seven applications
for denial and sent each to its policy and administrative section (policy section), which generally reviews all denied
applications. However, these applications remained in the policy section after their respective due dates had lapsed and
because the branch does not track the length of time applications remain in its policy section, it automatically enrolled
these ineligible providers. Further, we noted that branch staff enter incorrect and inaccurate data into the Provider
Enrollment Tracking System (PETS), decreasing the branch’s ability to effectively track the status of applications.
Additionally, some applicants resubmit information to remedy their deficient applications soon after the required
time period lapses, and state law requires the branch to deny these applications and treat them as new, preventing
some eligible providers from offering services as soon as they otherwise could. Also, given that few applicants request
preferred provider status and the branch’s current low average time to process an application, the status offers
applicants few benefits.
Further, the branch does not adequately track which of the department’s review units it refers applications to or the
reasons for these referrals. Moreover, state law does not prescribe a required number of days within which the branch
must approve or deny an application it has referred for further review, and we noted that referred applications take
an inordinate length of time to process. Further, although the branch uses fraud indicators to process applications
that appear questionable or suspicious, these indicators generally do not align with the reasons the branch ultimately
gives for referring applications in the PETS—hindering the branch’s ability to track the legitimate reasons it has for
referring applications and decreasing its capability to detect potential fraud trends during the enrollment process.
Finally, because physicians applying to become providers in Medi-Cal and Medicare are asked to provide much of the
same information, and given that the federal government is beginning two initiatives to ensure that more accurate and
updated information is available about Medicare providers, the department may be able to rely on some of Medicare’s
data in the near future.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
BUREAU OF STATE AUDITS
555 Capitol Mall, Suite 300, Sacramento, California 95814 Telephone: (916) 445-0255 Fax: (916) 327-0019 www.bsa.ca.gov
Contents
Summary 1
Introduction 7
Audit Results
The Provider Enrollment Branch Generally Adheres
to Its Application Process, but It Processes Some
Applications Late and Could Prevent Some From
Being Denied 17
The Branch’s Reasons for Referring Applications Lack
Specificity, and Referred Applications Remain in
Processing for Long Periods 34
The Department May Be Able to Streamline Its
Application Process for Physicians by Relying More
on Medicare Data 42
Recommendations 45
Appendix A
Applications the Provider Enrollment Branch
Processed After the Required Time Periods 49
Appendix B
A Comparison of Medi-Cal’s and Medicare’s Required
Application Elements and Procedures Used to Verify
the Accuracy of Applicant Information 51
Response to the Audit
Health and Human Services Agency,
Department of Health Services 57
California State Auditor’s Comments on the Response
From the Department of Health Services 65
sUMMARY
RESULTS IN BRIEF
The Department of Health Services (department)
administers the State’s Medicaid program, known as
the California Medical Assistance Program (Medi-Cal).
Medi-Cal is a federal program, funded and administered
through a state and federal partnership, to benefit low-income
Audit Highlights . . .
people who lack health insurance. In July 1999 the department
Our review of the Department undertook several steps to stop individuals intent on defrauding
of Health Services’
Medi-Cal from obtaining provider numbers. One step was to
(department) provider
organize the Provider Enrollment Task Force (task force), which
application and referral
processes for California’s developed and filed emergency regulations requiring applicants
Medical Assistance Program to complete a more in-depth application package, including
(Medi‑Cal) found that:
a 10-page financial disclosure statement. In July 2000 the
Because of recent policy department replaced the task force with the Provider Enrollment
and administrative Branch (branch), whose primary function has been to review
changes, the department’s
applications and prevent providers with fraudulent intent from
Provider Enrollment
participating in Medi-Cal.
Branch (branch) has
seen a decrease in the
number of applications The number of applications the branch receives and processes
it receives; however, the
has decreased because of recent policy and administrative
branch does not process
changes. For instance, based on information in its Provider
some applications within
the time periods specified Enrollment Tracking System (PETS), the number of
in statute. applications the branch received decreased from 2,200 in
October 2005 to 1,480 in September 2006. This decrease
Branch staff continue to
enter data incorrectly into appears to have shortened the average time the branch
the Provider Enrollment needs to process applications. However, although required
Tracking System (PETS),
by law to process applications and to notify applicants of its
decreasing the branch’s
final determination within specific time periods, the branch
ability to track the status
of applications effectively. continues to review some after the end of the required
processing period and is forced to enroll other applicants
Some applicants
into Medi-Cal automatically, on provisional status, because it
resubmit information to
cannot make a timely determination on the application. In fact,
remedy their deficient
applications soon after for the period October 1, 2005, through September 30, 2006
the required time period (federal fiscal year 2006), the branch did not process
lapses, and state law
108 applications within the required time periods. Of these, it
requires the branch to
deny these applications automatically enrolled eight applicants into the program on
and treat them as new, provisional status as required but did not automatically enroll
preventing some eligible
or appropriately notify the remaining 100. When the branch
providers from offering
does not automatically enroll applicants when required, or
services as soon as they
otherwise could.
continued on next page . . .
California State Auditor Report 2006-110 1
promptly process applications and notify applicants of its final
Given that few applicants
request preferred provider determination, it may prevent or delay some eligible providers
status and the branch’s from delivering services to Medi-Cal beneficiaries.
current low average time
to process an application,
Further, the applications of seven of the eight automatically
the status offers
applicants few benefits. enrolled applicants had been recommended for denial and
sent to the branch’s policy and administrative section (policy
The branch does not
section), which generally reviews all denied applications.
adequately track which of
However, their applications remained in the policy section
the department’s review
units it refers applications after their due dates for completing processing had passed.
to or the reasons for The branch does not track the length of time applications
these referrals.
recommended for denial remain in its policy section, so it
State law does not automatically enrolled these ineligible providers. Although these
prescribe a required applicants can be removed from Medi-Cal while on provisional
number of days in
status, they may submit claims for services provided from the
which the branch must
date the branch received their application to the date of their
approve or deny referred
applications, and we termination from the program. The department may recover
noted that the department payments made to ineligible providers, but it incurs additional
takes an inordinate
costs when it must do so for providers whose applications
length of time to process
should have been denied during the enrollment process.
referred applications.
Because physicians
Despite concerns we raised in a May 2002 audit regarding
applying to become
whether branch staff were entering data accurately and
providers in Medi‑Cal
and Medicare are asked consistently into PETS, we noted that branch staff continue
to provide much of the to enter data incorrectly, decreasing the branch’s ability to
same information, and
track the status of applications effectively. For instance, branch
the federal government is
management does not perform secondary reviews of the dates
beginning two initiatives
to ensure that more branch staff enter into PETS, such as the dates applications were
accurate and updated received, returned to the applicant, or processed. Inaccuracies
information is available
in these dates prevent the branch from tracking the status of
about Medicare providers,
the department may applications effectively.
be able to streamline
its application process
Additionally, although the branch generally notifies applicants
by relying on some of
in a timely manner that their applications are deficient,
Medicare’s data in the
near future. applicants often fail to correct deficiencies within the required
35-day time period, or do not resubmit their corrected
applications at all. This failure is the leading reason for denied
applications. In comparison, the federal Medicare program
allows applicants to remedy their deficient applications by
submitting additional information within a 60-day time
frame—25 days longer than Medi-Cal’s time frame. To determine
whether applicants who missed the 35-day deadline would
have met the 60-day deadline, we calculated the number of
applications that were resubmitted to the branch between 11
and 25 days after the 35-day time period during federal fiscal
year 2006 (we allotted an additional 10 days for mail delays).
2 California State Auditor Report 2006-110
According to PETS data, 258 applications were resubmitted
within this time frame and, therefore, treated as new
applications subject to the 180-day processing period—of which
the branch ultimately approved 126. Had state law authorized
the branch to process these resubmitted applications within
a 60-day time frame rather than a new 180-day time frame, a
greater number of eligible providers could have provided services
to beneficiaries sooner than they otherwise did.
Moreover, the branch could do a better job of informing
applicants that a leading reason for denial is submitting
an outdated or inappropriate application form. More than
20 percent of applicants were denied during federal fiscal
year 2006 for this reason. When the branch does not adequately
notify applicants that using outdated or inappropriate
application forms will result in denial of application packages,
it increases the number of applications it must process and
ultimately deny and increases the length of time before some
eligible providers can be enrolled in Medi-Cal. In turn, this may
limit some beneficiaries’ access to Medi-Cal providers.
State law allows certain applicants to apply for preferred
provider status. However, the only benefit to an applicant of
qualifying for this status is that the branch must process the
application within 90 days instead of 180 days. According to
PETS, only 4 percent of the applications the branch received in
federal fiscal year 2006 requested preferred provider status and,
given that the branch’s average time to process an application in
September 2006 was just 30 days, the 90-day processing period
appears to be irrelevant. The benefits to applicants appear to be
marginal, so we question the value of the status. However, the
processing delays that led to the state law that created preferred
provider status could arise in the future. Thus, to the extent that
the department chooses to keep this status, the branch should
increase its efforts to convey to prospective applicants that
their application packages for preferred provider status will be
denied if they are lacking certain elements. Consequently, the
branch could see an increase in the number of applicants that
could benefit from the shorter processing period that preferred
provider status offers.
Although the branch is authorized to conduct additional reviews
by referring application packages to other units within the
department, as well as to staff within the branch itself, it does
not track referral information adequately. For example, some
of the reasons that branch staff may select in PETS for referring
California State Auditor Report 2006-110
applications are vague or problematic. In fact, nearly one-half
of the applications that the branch referred in federal fiscal year
2006 lack a specific reason for the referral. This prevents the
branch from contributing to the department’s Medi-Cal fraud
prevention efforts on an ongoing basis because it is unable to
accurately detect and track potential trends in fraud during the
enrollment process. Further, branch staff failed to enter the units
to which 10 percent of the applications it referred were sent in
federal fiscal year 2006, which could prevent the branch from
tracking the status of applications referred for secondary review.
Further, state law does not prescribe a required number of days
within which the branch must approve or deny an application
it has referred for further review, and we noted that referred
applications take an inordinate length of time to process. For
instance, PETS indicates the average number of days to process
applications that the branch referred in federal fiscal years
2004 and 2005, was 322 and 255 days, respectively. Moreover,
in federal fiscal year 2006, the branch approved the majority
of applications it referred on which it made a final decision.
Referring applications that it later approves indicates that
the branch may need to reevaluate and update the high-risk
indicators it uses when processing applications. Additionally, in
the past six months, the branch and the Medical Review Branch
within the department’s Audits and Investigations division have
not held their regular meetings that served to foster information
sharing between the two branches—which, if they do not
resume, may limit their effectiveness in contributing to the
department’s anti-fraud efforts because less emphasis is placed
on tracking trends in fraud during the enrollment process.
Finally, the department may have the opportunity to streamline
some of its enrollment processes for Medi-Cal applicants who
are already Medicare providers by relying more on Medicare
provider information in the future. Specifically, the federal
government is beginning two initiatives intended to ensure
that more accurate and updated information is available about
Medicare providers. Physicians seeking to become providers in
Medi-Cal and the federal Medicare program are asked to provide
much of the same information in their application packages.
Consequently, for those physician applicants it identifies as
being in good standing with Medicare, the department may be
able to rely on some of Medicare’s data instead of performing
redundant procedures to verify the same information.
Although it is too early to determine the effectiveness of
these initiatives, it could be worthwhile for the department
California State Auditor Report 2006-110
to periodically assess Medicare’s progress and the benefits
the department could derive from this centralized source
of information.
REcommENdaTIoNS
To improve its application and referral processes when enrolling
Medi-Cal providers, the branch should:
• Notify applicants that it has automatically enrolled them
as provisional Medi-Cal providers when the branch has not
processed the applications within the required time periods.
• Modify PETS to track the length of time applications it
recommends for denial remain in its policy section for review
to ensure that it does not automatically enroll or pay the
claims of ineligible providers when the review does not occur
in a timely manner.
• Include in management’s secondary reviews of applications
periodic reviews to ensure that staff are accurately and
consistently entering into PETS the correct dates the branch
received, processed, or returned the application.
• Increase its efforts to notify applicants that they must use
current and appropriate application forms to avoid being
denied enrollment into Medi-Cal.
• Coordinate with the department to update PETS to reflect the
specific reasons that it refers applications for further review,
so that they are aligned with its fraud indicators and high-risk
review checklist. This will allow the branch to better identify
trends in fraud during the enrollment process.
The department should seek legislation to revise state law
to extend the 35-day time period applicants have to remedy
deficiencies in their applications.
The department should seek legislation to revise state law to
eliminate preferred provider status. If it chooses to keep this
status and to increase the number of applicants that could
benefit from the shorter processing period that preferred
provider status offers, the department should increase its efforts
to notify applicants of the reasons it denies applications during
the prescreening for preferred provider status.
California State Auditor Report 2006-110
To ensure that it is referring those applicants at greatest risk
of committing fraud and not preventing eligible Medi-Cal
providers from providing services to beneficiaries, with direction
from the department, the branch and the Medical Review
Branch should:
• Reevaluate the appropriateness of the branch’s high-risk fraud
indicators periodically by consistently communicating and
collaborating with one another.
• Place increased emphasis on processing those applications
referred for further review within a reasonable time period.
In addition, the branch should monitor the implementation
of Medicare’s revalidation process, in which it verifies the
enrollment information for all its providers. If it identifies
opportunities for streamlining its application and verification
procedures, the branch should make modifications as
appropriate for Medicare providers seeking enrollment
in Medi-Cal.
agENcy commENTS
The department agrees with the recommendations in our
report and states that while it is proud of the significant
improvements it has made with regards to the enrollment of
providers into Medi-Cal, the report highlights areas that can
still be improved upon and provides valuable feedback to that
effect. The department stated that it intends to incorporate the
recommendations accordingly. n
6 California State Auditor Report 2006-110
intRodUCtion
BackgRoUNd
In 1965 Congress enacted the Medicaid program, a health
insurance program jointly funded by the federal government
and the states. Medicaid benefits certain low-income people
who lack health insurance, including low-income families with
children and persons on Supplemental Security Income who
are aged, blind, or disabled. The U.S. Department of Health and
Human Services, Centers for Medicare and Medicaid Services
(CMS) provides regulatory oversight of Medicaid by reviewing
state plans and approving and monitoring waivers of federal
requirements, but each state operates its own program.
Within broad federal guidelines, the states establish their own
eligibility standards; determine the type, amount, duration,
and scope of services; set payment rates; and administer the
program––including enrolling fee-for-service providers such as
physicians, pharmacists, and optometrists. In California the
Department of Health Services (department) directly administers
the State’s Medicaid program, the California Medical Assistance
Program (Medi-Cal). Medi-Cal’s fee-for-service program serves
approximately 3.4 million beneficiaries and accounts for
$34.7 billion in annual expenditures—slightly more than
one-fourth of the State’s fiscal year 2006–07 estimated budget.
A provider must obtain a valid Medi-Cal provider number in
order to bill Medi-Cal for services provided to an eligible Medi-
Cal beneficiary. The department’s Provider Enrollment Branch
(branch) reviews applications for noninstitutional providers—
providers other than hospitals and long-term care facilities—
including physicians, physician groups, pharmacies, podiatrists,
ground medical transportation, and clinical laboratories.
Between October 1, 2005, and September 30, 2006, it received
more than 20,000 provider applications for enrollment into
the program, including more than 14,000 applications from
physicians and physician groups.
dEpaRTmENT EFFoRTS To pREvENT FRaUdULENT
pRovIdERS FRom ENRoLLINg IN mEdI-caL
The branch was established in July 2000 and replaced the
department’s Provider Enrollment Task Force (task force), which
the department organized in July 1999 when it undertook
California State Auditor Report 2006-110
several steps to stop individuals intent on defrauding Medi-Cal
from obtaining provider numbers. Before 1999 California’s
Medi-Cal provider enrollment process was geared toward
enrolling applicants quickly; one application was used for all
provider types and only certain information was requested
from applicants. This application process left the department
susceptible to enrolling Medi-Cal providers intent on
committing fraud.
As part of the department’s antifraud efforts, in July 1999 the
task force developed and filed emergency regulations requiring
applicants to complete a more in-depth application package.
This package includes applications tailored to each provider type
and requiring additional information, a provider agreement
that allows the department to conduct background checks and
make unannounced visits, and a 10-page financial disclosure
statement. The task force also established new procedures,
including more comprehensive background checks to prevent
applicants who have committed fraud, engaged in past abusive
claim practices, or entered into arrangements with others who
have done so from entering Medi-Cal.
The emergency regulations also authorized the department to
require existing providers to submit new applications to ensure
that they were suitable to continue participating in Medi-Cal,
a process referred to as reenrollment. Currently, there are two
units within the branch that concentrate most, or a portion
of their time, on processing application packages for providers
that are reenrolling in Medi-Cal. According to the department’s
September 2005 Medi-Cal fraud control strategic plan,
reenrollment will be an ongoing process, and the department’s
Audits and Investigations division (Audits and Investigations)
and its Payment Systems Division will incorporate the
results of its annual Medi-Cal payment error studies into the
reenrollment plan.
To conduct background checks and unannounced visits to verify
the accuracy of the information applicants provide, the branch
generally refers application packages to the Medical Review
Branch within Audits and Investigations. The Medical
Review Branch performs an additional review of the applicant,
including an on-site inspection when one is warranted, and
ultimately recommends that the branch approve, deny, or return
California State Auditor Report 2006-110
the application.1 The branch also may refer applications to
other units within the department, such as the Office of Legal
Services. The applications the branch refers for further review
are no longer subject to the required processing periods, and
state law does not specify a time frame within which the referred
application must be processed.
REqUIREd pRocESSINg pERIodS FoR appLIcaTIoNS
Effective January 1, 2004, a state law took effect that modified
the Medi-Cal provider enrollment process. As shown in Figure 1
on the following page, the branch generally is required to
notify applicants within 180 days of receiving
their applications that they have been granted
provisional provider status for 12 months; that their
Required Time Frames for
application has been denied or is deficient because
Processing Applications
it is incomplete; or that their application has been
• New application: 180 days. referred for further review. 2 State law requires
the branch to notify the applicant of a deficient
• Resubmitted application: 60 days after
receipt of the revised application, provided application and gives the applicant 35 days to
it is received within the 35-day time frame
revise and resubmit the application to the branch.
allowed for correcting deficiencies.
Additionally, state law gives the branch 60 days to
Source: California Welfare and Institutions process any applications that are resubmitted within
Code, Section 14043.26. the 35-day time frame, potentially allowing the
Note: These time frames do not apply to branch a maximum of 275 days to process a deficient
applications that are referred for further review
application, as shown in the text box. If the branch
or to applications for preferred provider status.
fails to process applications within the required
time period, it must notify the applicants that it is
enrolling them automatically and placing them on
provisional status for 12 months, or 18 months if the applicant
requested, and the branch approved them for, preferred provider
status as discussed below.
State law also allows certain providers, specifically physicians
and osteopaths, to apply for preferred provider status, which
requires the branch to process the application package within
90 days of its receipt. Within 90 days, the branch must notify
applicants requesting preferred provider status that they have
1 The branch generally returns applications when the applicant submits a deficient
application, withdraws from the enrollment process, or is already enrolled in the
program as a rendering provider—physicians and osteopaths that provide services on
behalf of physician groups—and no longer need to apply.
2 California Welfare and Institutions Code, Section 14043.29(a), specifies that if at the
end of the provisional status the provider has met certain requirements, including
continuing to demonstrate compliance with the standards for enrollment, the
provisional status will cease and the provider will be enrolled in Medi-Cal without
designation as a provisional provider.
California State Auditor Report 2006-110
FiguRe 1
general Process for Reviewing Medi-Cal Applications and Notifying Applicants
The branch receives
the application
package
Provide written Within
notification to the 30 days the branch
applicant that it has must either:
received the application
package and
will evaluate it
Provide written notification
to the applicant that a
moratorium* exists and
return the application
package to the applicant
Provide written
Within
notification to the
the first 180 days Provide written notification
applicant that provisional
the branch must to the applicant that the
status has been granted
either:
for a period of 12 months application is denied
Provide written Provide written notification
notification to the to the applicant that the
applicant that the branch application is incomplete
is conducting background and return the application
checks, pre-enrollment package to the applicant
inspections, or
unannounced visits If applicant resubmits
application package after
35 days, the branch must
deny it and treat it as a
State law does not new application
prescribe the number of
days in which these If applicant resubmits
additional reviews must be application package within
completed. After the 35 days:
reviews are conducted,
the branch notifies the
applicant that the
application has been
Within
approved, denied, or that
60 days the branch
additional information is
must either:
needed
Provide written Provide written notification Provide written notification
notification to the to the applicant that the to the applicant that the
applicant that provisional branch is conducting application is denied
provider status has been background checks,
granted for a period of pre-enrollment inspections,
12 months or unannounced visits
Sources: California Welfare and Institutions Code, Section 14043.26, California Code of Regulations, Title 22, Section 51000.50,
and the Department of Health Services’ Web site.
Note: This figure does not depict the application review process used for applicants seeking preferred provider status.
* Moratoriums on enrollment apply to clinical laboratories, durable medical equipment providers, nonchain-nonpharmacist-
owned pharmacies in Los Angeles County, and adult day health care centers.
10 California State Auditor Report 2006-110
met the criteria for a preferred provider or that they have
not met the criteria and will be subject to the regular 180-day
review. State law requires the department to notify the applicant
within 90 days if the applicant meets the requirements and to
grant provisional status effective from the date of that notice.
The branch’s policy is to enroll an applicant in Medi-Cal
automatically and grant the applicant provisional status for
18 months if it fails to process the application on or before the
90th day.
mEdIcaRE’S pRovIdER ENRoLLmENT pRocESS
The federal Medicare program’s enrollment process differs
in some ways from the one used for Medi-Cal. Medicare is
administered by the CMS and provides health insurance to
people who are 65 or older, the disabled, people with end-stage
renal disease, and certain others who elect to purchase Medicare
coverage. Designated Medicare fee-for-service contractors
(contractors) process enrollment applications and verify the
information provided. The CMS outlines the requirements
it has set for contractors in its Medicare Program Integrity
Manual (manual). The manual states that contractors must
process 99 percent of new provider enrollment applications
within 180 days of receiving them, but it does not need to
automatically enroll applicants whose applications are not
reviewed within 180 days. Unlike Medi-Cal, Medicare does
not allow for interruptions in the processing time period for
applications that are referred to other entities, such as the
U.S. Department of Health and Human Services’ Office of
Inspector General.
ThE BUREaU oF STaTE aUdITS’ paST REpoRTS
RELaTEd To mEdI-caL pRovIdER ENRoLLmENT
In May 2002 the Bureau of State Audits (bureau) issued a report
titled Department of Health Services: It Needs to Significantly
Improve Its Management of the Medi-Cal Provider Enrollment Process,
Report 2001-129, which made a variety of recommendations to
improve the Medi-Cal provider enrollment process. The report
concluded that the branch was not using its resources effectively
to process provider applications and that it was not coordinating
effectively with Audits and Investigations. Additionally, the
report noted that the branch did not ensure that certain enrolled
providers had current and complete disclosure statements on
file, as required by federal regulations. The report recommended
California State Auditor Report 2006-110 11
that the branch use its Provider Enrollment Tracking System
(PETS) more effectively; that it create strategies to ensure that all
providers have current applications, disclosure statements, and
agreements on file; and that applications referred to Audits and
Investigations be tracked.
In December 2003 the bureau issued a report titled Department of
Health Services: It Needs to Better Plan and Coordinate Its Medi-Cal
Antifraud Activities, Report 2003-112. This report concluded
that, although the branch had implemented some of the
recommendations made in 2002 pertaining to the use of PETS
and improving effectiveness, it had not fully implemented 10
of the 12 recommendations reviewed. The report recommended
that the department improve the processing of provider
applications, subject all individual Medi-Cal providers to the
same screening requirements, and ensure that enrolled providers
continue to be eligible to participate in the program.
ScopE aNd mEThodoLogy
The Joint Legislative Audit Committee (audit committee)
requested that the bureau review the department’s Medi-Cal
provider enrollment process, as well as the laws, rules, and
regulations governing it. We were asked to compare the
department’s Medi-Cal provider application and enrollment
procedures to those used for the federal Medicare program
and identify similarities and differences in the applications and
in the process used to verify provider information. We also
were asked to determine if any information is shared between
Medi-Cal and Medicare during the application process and
whether opportunities exist for sharing additional information
to streamline the enrollment process.
In addition, the audit committee requested that we determine
whether the department tracks and monitors the average
time it takes to review a physician application and to identify
the number of full-time staff assigned to review physician
applications and the number of hours allocated for each review.
We also were asked to identify the number of applications
denied over the past year and to determine the reasons for
the denials. The audit committee requested that we review the
department’s procedures for handling deficient applications,
including when it notifies applicants about deficiencies, and to
identify the type of information that is most often missing from
these applications.
12 California State Auditor Report 2006-110
We were asked to identify the number of applications referred to
Audits and Investigations in the past year and to determine the
reason for the referral and the number of referred applications
that were denied. The audit committee also requested that we
identify the number of applicants requesting preferred provider
status in the past year and that we categorize this information
by the department’s enrollment decision, physician specialty,
and geographic location. Lastly, the audit committee asked that
we identify the total number of applicants awaiting enrollment
into Medi-Cal; determine the total number of applications
the department did not process within the designated review
period; and categorize each group by provider type, specialty,
geographic location, Medicare enrollment status, and
application type.
To address the audit committee’s requests, we focused our review
on the processes and procedures related to the initial application
stage because this stage affects whether, and how soon, eligible
Medi-Cal providers can deliver services to Medi-Cal beneficiaries.
Our review excluded the branch’s reenrollment process
because providers subject to this review are active and may
continue to provide services to beneficiaries as they undergo
reenrollment. Additionally, we excluded applications from
out-of-state providers because they may apply as a Medi-Cal
provider only after they have delivered emergency services to a
Medi-Cal beneficiary.
To determine the department’s Medi-Cal provider enrollment
process we reviewed state law, regulations, and internal policies
and procedures and interviewed staff within the branch and
Audits and Investigations.
To compare the department’s Medi-Cal provider application and
enrollment procedures to those used for the federal Medicare
program, and to determine whether any information is shared
between Medi-Cal and Medicare during the application
process, we interviewed staff from the branch and Audits and
Investigations. Also, we interviewed staff from the federal
Medicare program and obtained and reviewed Medi-Cal
and Medicare physician provider applications, enrollment
procedures, and reports.
To determine whether the department tracks and monitors the
average time it takes to review a physician application, and
to identify the number of full-time staff assigned to review
physician applications and the number of hours allocated for
California State Auditor Report 2006-110 1
each review, we interviewed branch staff and obtained and
reviewed applicable reports, job duty statements, and payroll
data. In our review, we noted that physician applications are
processed by staff members who also process other provider type
applications. Because of this, and given that the branch does
not allocate or track the number of hours to review physician
applications, we used job duty statements and developed
estimates from ad hoc time sheets and by interviewing branch
staff. We applied the proportion of time we derived to the
number of months worked by the branch staff to determine
the number of full-time equivalent staff the branch has assigned
to review physician applications. Lastly, we determined the
number of applications processed by the aforementioned
staff by reviewing data in PETS, the branch’s application
tracking database.
To identify the number of applications denied during the
period October 1, 2005, through September 30, 2006 (federal
fiscal year 2006) and to determine the reasons for the
denials, we reviewed data in PETS, interviewed department
staff, and reviewed the branch’s Web site. We focused our
review on federal fiscal year 2006 because it offered more
up-to-date information than the period July 1, 2005, through
June 30, 2006—the state fiscal year. To review the department’s
procedures for handling deficient applications, we interviewed
branch staff and reviewed state laws and regulations. The branch
does not track the reasons applications are deficient in PETS, so
we judgmentally sampled 120 deficiency letters to determine
the reasons for the deficiencies. Further, we reviewed data
in PETS to determine how quickly the department processes
resubmitted applications.
To identify the number of applications referred to Audits and
Investigations’ Medical Review Branch during federal fiscal
year 2006, and to identify the reason for the referral and the
number of referred applications that ultimately were denied, we
interviewed branch staff, reviewed data in PETS, and obtained
and reviewed departmental guidance on fraud indicators.
Additionally, we determined the number of applications the
branch referred to the Medical Review Branch during federal
fiscal years 2004 and 2005 by reviewing data in PETS.
Additionally, to identify the number of applicants requesting
preferred provider status during federal fiscal year 2006, as
well as the number of applications approved for the status, the
number of physicians by specialty and geographic location, the
1 California State Auditor Report 2006-110
number of applications denied, and the reasons for the denials,
we interviewed department staff and reviewed data in PETS. The
department does not track the specialty of physician applicants
in PETS, so we manually reviewed physician applications to
determine the specialties for physicians who applied for
preferred provider status during federal fiscal year 2006. The
department does not track the reasons applicants are denied
preferred provider status, so we selected a statistically valid
sample of applications that did not pass the department’s
preferred provider prescreening and manually determined the
reason for the denial.
To identify the total number of applicants awaiting enrollment
in Medi-Cal and the total number of applications the branch
did not process within the required processing period, and to
categorize each application group by provider type, specialty,
geographic location, Medicare enrollment status, and type of
provider application, we interviewed branch staff and reviewed
data in PETS, and Medi-Cal provider enrollment applications
and notification letters. The department does not track
Medicare enrollment status or specialty in PETS, so we could not
categorize the application groups in these ways.
Government auditing standards issued by the
U.S. Government Accountability Office require us to
Definitions of Data Reliability
assess the reliability of computer-processed data. (See
Sufficiently Reliable Data: Based on audit the text box for the definitions of data reliability.) We
work, an auditor can conclude that using the
assessed the reliability of PETS data by performing
data would not weaken the analysis nor lead to
an incorrect or unintentional message. electronic testing of selected data elements, reviewing
existing information about the data and the system
Not Sufficiently Reliable Data: Based on audit
work, an auditor can conclude that using the that produced them, interviewing department
data would most likely lead to an incorrect
officials knowledgeable about the data, and testing
or unintentional message and the data have
significant or potentially significant limitations, the accuracy and completeness of the data. Based
given the research question and intended use of on our analysis, we determined that the data were
the data.
of undetermined reliability for the purposes of
Data of undetermined Reliability: Based
our audit. Specifically, the branch returns many
on audit work, an auditor can conclude that
use of the data could lead to an incorrect or application packages to applicants seeking enrollment
unintentional message and the data have into the program because they lack required
significant or potentially significant limitations,
information. The branch does not maintain copies
given the research question and intended use of
the data. of these application packages, and applicants do not
always resubmit them. Because we did not have these
Source: Assessing the Reliability of Computer- returned applications as supporting documentation,
Processed Data from the U.S. Government
we were unable to trace some key data fields in PETS
Accountability Office.
to the original document. In addition, the branch’s
documentation for applications that it approved
or denied was not always sufficient to support the
California State Auditor Report 2006-110 1
accuracy of PETS data. Specifically, certain data fields in PETS
may be populated by branch staff using their judgment, such
as selecting the type of application submitted from a list of
options in PETS. Further, certain information was inconclusive
for applications that the branch did maintain, including the
dates applications were received or processed as well as illegible
document numbers.
Additionally, we determined that PETS data regarding applicants’
provider type was not sufficiently reliable based on our accuracy
testing. Specifically, we found that branch staff incorrectly
populated the provider type field in the PETS data for three of
56 documents that we examined. At a 95 percent confidence
level, this result indicates that the error rate may be as low as
1.1 percent or as high as 15.7 percent. Using our professional
judgment, we have set our tolerable rate of error at 10 percent
and conclude that using data with an error rate potentially
greater than this threshold would weaken our analysis or lead
to an incorrect or unintentional message. Thus, given that the
high end of the error rate of the branch’s provider type field
exceeds our tolerable rate of error, we determined that this
field was not sufficiently reliable for our purpose of determining
an applicant’s provider type. Further, we determined that the
field indicating whether an applicant was applying for preferred
provider status was not sufficiently reliable for applications
that were still in process as of September 30, 2006. Specifically,
we found that three of the nine documents we examined were
recorded incorrectly in PETS as having preferred provider status.
Further, we determined that the data relating to the reasons the
branch refers applications for secondary review, and the units
to which it refers these applications, are not sufficiently reliable
for the purpose of identifying these reasons or the units to
which the branch refers applications because the data were not
fully populated. Because no other criteria or data were available
to replace these unreliable data, we use these data, as indicated,
in the Audit Results section. However, given that these error
rates could materially change the number or percentage of
applicants by provider type or preferred provider status, it could
lead to an incorrect or unintentional message. Thus, these
weaknesses are potentially significant. n
16 California State Auditor Report 2006-110
AUdit ResULts
ThE pRovIdER ENRoLLmENT BRaNch gENERaLLy
adhERES To ITS appLIcaTIoN pRocESS, BUT IT
pRocESSES SomE appLIcaTIoNS LaTE aNd coULd
pREvENT SomE FRom BEINg dENIEd
Because of recent policy and administrative changes, the
Department of Health Services’ (department) Provider
Enrollment Branch (branch) has seen a decrease in the
number of applications it receives from providers seeking
enrollment into the California Medical Assistance Program
(Medi-Cal). However, the branch does not process some
applications within the required time periods, and it has not
placed some of these applicants on provisional status, although
it is required to do so by state law.3 Further, despite concerns
raised by the Bureau of State Audits (bureau) in May 2002
regarding whether branch staff were entering data accurately
and consistently into the Provider Enrollment Tracking System
(PETS), we noted that branch staff continue to enter incorrect
and inaccurate data, which decreases the branch’s ability to track
the status of applications effectively.
The branch generally notifies applicants promptly that their
applications are deficient. However, applicants often fail to
resubmit information to remedy these deficiencies within the
required time period; in fact, this is the leading cause for denials.
Although some applicants resubmit information soon after
the required time period expires, state law requires the branch
to deny these applications and treat them as new, preventing
some eligible providers from offering services as soon as they
otherwise could. Moreover, the branch could do a better job of
informing applicants that another common cause of denials
is submitting an outdated application form. Finally, preferred
provider status confers little benefit to the applicant, so the
value of this status is minimal.
3 At the time the branch approves and enrolls a new Medi-Cal provider, the provider is
placed on provisional status or preferred provisional status—depending on the type
of application submitted—for a period of 12 months or 18 months, respectively. If
the department determines the existence of any grounds, such as fraud or abuse, to
deactivate or suspend the provider, it may at any time terminate the status, regardless
of whether the period of time for the provisional status granted has elapsed.
California State Auditor Report 2006-110 1
The Number of applications the Branch Receives has
decreased, Which has Shortened Its average processing Time
Two primary factors appear to have contributed to the general
decrease in the number of applications the branch received,
processed, returned, and had in its ending inventory, as
shown in Table 1, during federal fiscal year 2006.4 The first
factor is the department’s implementation of regulations in
December 2005 that eliminated the requirement for rendering
providers—physicians who provide services as members of
a provider group and bill Medi-Cal by using the provider group’s
number—to submit an application package each time they
join a new provider group or change location. According to
the chief of the branch, the second contributing factor is that
the branch recently increased its efforts to remediate deficient
applications by discussing deficiencies with the applicant
directly, rather than returning the application for remedy. If
the branch is able to remedy deficiencies quickly and avoids
returning deficient applications for remedy, the number of
applications the branch receives will continue to decrease. Given
that rendering providers represented more than half of the
more than 130,000 Medi-Cal providers in 2006, and that the
chief of the branch estimates that 40 percent of the applications
the branch processes are deficient, it is not surprising that the
number of applications the branch received decreased from
2,200 in October 2005 to 1,480 in September 2006, according to
PETS data.
This decrease appears to have improved the branch’s ability to
process more applications in a timely manner. For instance,
as shown in Table 1, the branch took an average of 69 days
to process an application in October 2005, markedly longer
than the average in September 2006 of just 30 days. The chief
of the branch explained that staff have processed applications
more effectively since the branch increased the amount of staff
training, focused on motivating staff, and encouraged staff to
decrease the inventory of applications. Although we recognize
these efforts, the main contribution to the branch’s increased
effectiveness may be that it has received fewer applications,
which reduces the time applications wait until staff begin
processing them. Consequently, the average number of days
staff take to process an application and the branch’s ending
inventory of applications, according to PETS data, have
decreased substantially.
4 As mentioned in the Scope and Methodology, our review of the branch’s enrollment
processes and procedures focused on the initial application process, which excludes
those applicants undergoing reenrollment and out-of-state applicants who already have
provided services to Medi-Cal beneficiaries.
1 California State Auditor Report 2006-110
TAble 1
Number of Applications the branch Received, Approved or Denied, Returned, and
Had in its ending inventory generally Decreased During Federal Fiscal Year 2006
Number of Average
Number of Applications Days to Number of Average
beginning Applications Approved or Approve or Applications Days to ending
inventory* Received Denied Deny† Returned‡ Return† inventory§
200
October 5,875 2,200 1,694 69 558 71 5,823
November 5,823 2,623 1,789 66 532 71 6,125
December 6,125 2,178 1,697 63 1,308 65 5,298
2006
January 5,298 1,620 1,248 60 1,698 59 3,972
February 3,972 1,533 1,046 61 1,005 60 3,454
March 3,454 1,854 1,192 62 1,140 74 2,976
April 2,976 1,211 1,272 51 936 54 1,979
May 1,979 1,704 1,047 41 658 54 1,978
June 1,978 1,320 1,036 39 670 29 1,592
July 1,592 1,589 990 36 486 29 1,705
August 1,705 1,507 797 40 642 40 1,773
September 1,773 1,480 880 30 607 28 1,766
Totals 20,1 1,6 10,20 6
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch) Provider Enrollment Tracking System (PETS).
Note: As we mention in the Scope and Methodology section of this report, we were unable to determine the accuracy of
certain data fields in PETS because the branch does not maintain copies of all applications for which it enters information into
PETS. In addition, certain data fields in PETS may be populated by branch staff using their judgment and certain information on
applications the branch did maintain were inconclusive. Thus, these data are of undetermined reliability.
* Beginning Inventory is as of the first day of the month and matches the ending inventory from the previous month.
† Average number of days is based on calculations using information from each individual application to develop
accurate averages.
‡ Returned applications include those that the branch determined to be deficient or needlessly submitted by an existing rendering
provider, or were withdrawn by the applicant.
§ Ending inventory includes those applications that the branch has yet to process and those that it has referred for additional
background checks.
In fact, as shown in Table 1, the number of applications the
branch had in its ending inventory appears to have decreased
significantly in just one year, from 5,823 in October 2005
to 1,766 in September 2006. The branch’s ending inventory
includes applications for both physicians and nonphysicians.
According to PETS data, as of September 30, 2006, 50 percent,
or 874, of the 1,766 applicants awaiting enrollment into
Medi-Cal were physicians, including 151 existing Medi-Cal
physician providers who were requesting an additional address
or a change of address. Because we found that the error rate
California State Auditor Report 2006-110 1
of the provider type field in PETS data may be as high as
15.7 percent, we consider the information presented here to
be not sufficiently reliable for determining the provider type.
Consequently, using the branch’s provider type information as
the basis for determining an applicant’s provider type could lead
to incorrect conclusions. The purpose of displaying it is to show
how the branch could use its current system to provide relevant
information if it maintained accurate data.
Figure 2 provides a detailed breakdown of the branch’s
September 2006 ending inventory of physician applications
by geographic location. As the figure shows and according to
PETS data, 334, or 38 percent, of the 874 physician applications
in process by the branch as of September 30, 2006, were from
Los Angeles County—which is not surprising given that the
county’s general population represents nearly 30 percent of
the State’s population.5
Of the branch’s 78 employees who process applications,
The chief of the branch
approximately 30 full-time equivalent employees were assigned
estimated that each
to review the 14,166 physician applications the branch received
full‑time equivalent
in federal fiscal year 2006.6 The chief of the branch explained
employee processes
that the branch does not allocate a specific number of hours that
an average of three
its staff will spend processing an application because each
physician applications
application is different and certain types generally take longer
each day, which is
to process than others. However, he estimated that each
consistent with the
full-time equivalent employee processes an average of three
3.3 applications our
physician applications each day, which is consistent with the
analysis indicated.
3.3 applications our analysis indicated.
Although it does not monitor the average time it takes staff
to review applications, branch management indicated that it
does track the status of applications undergoing the enrollment
process by using aging and inventory reports, which it generates
from PETS. The aging reports list each application that is within
30 days or 60 days of the end of the applicable time period
within which the branch is required to process the application.
According to the chief of the reenrollment section within the
branch, management uses these reports on a weekly basis to
track the work that needs to be completed.
5 Based on the Department of Finance’s July 1, 2006, county population estimates.
6 Because we found that the error rate of the provider type field in PETS data may be as
high as 15.7 percent, we consider the information presented here to be not sufficiently
reliable for determining the provider type. Consequently, using the branch’s provider
type information as the basis for determining an applicant’s provider type could lead to
incorrect conclusions.
20 California State Auditor Report 2006-110
FiguRe 2
Number of Physician Applicants Seeking enrollment into Medi-Cal by County
Whose Applications the branch Had Yet to Process as of September 0, 2006
Legend
0
1–5
6–13
14–26
27–64
334
Butte—7
Yolo—9
Sacramento—45
San Joaquin—13
Sonoma—12
San Francisco—20
San Mateo—10
Contra Costa—8
Fresno—26
Alameda—25
Tulare—7
Santa Clara—49
Monterey—6
Kern—16
San Bernardino—47
San Luis Obispo—9
Santa Barbara—7
Riverside—41
Ventura—11
Los Angeles—334
Orange—51
San Diego—64
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch) Provider Enrollment Tracking System (PETS).
Note: Because we found that the error rate of the provider type field in PETS may be as high as 15.7 percent, we consider the
information presented here to be not sufficiently reliable for determining the provider type. Consequently, using the branch’s
provider type information as the basis for determining an applicant’s provider type could lead to incorrect conclusions. The
purpose of displaying it is to show how the branch could use its current system to provide relevant information if it maintains
accurate data.
California State Auditor Report 2006-110 21
According to the chief of the branch, management also uses
inventory reports that display, twice a month, the number of
applications the branch received and processed, the number
of applications in its ending inventory, and the average
number of days it took to process the applications. Although
branch management indicated that they review this report
to monitor the branch’s progress in processing applications,
the report has proven to contain errors. Specifically, because
inventory reports did not include applications for which
the completion date was entered into PETS in a subsequent
reporting period, the branch was forced to correct the
inventory report by reducing the number of applications in its
ending inventory as of June 2006 by nearly 2,100.7 According
to the chief of the branch, this problem was remedied by
performing a physical inventory of the branch’s applications in
June 2006 and modifying how it calculates ending inventory for
the report. However, as we discuss later in this report, branch
staff continue to enter incorrect application information into
PETS, which affects management’s ability to track the status of
applications accurately.
despite a Recent Reduction in Workload, the Branch did Not
process Some applications Within Required Time periods,
and Inaccurate data in pETS continue to hinder the Branch’s
ability to Track application Status
Although the branch recently shortened its average time to
process applications, it continues to review some after the
required end of the processing period, and it automatically
enrolls other applicants into Medi-Cal because it has not
made a timely determination on the application. We reviewed
the status of applications maintained in PETS for the period
October 1, 2005, through September 30, 2006, and noted that
the branch did not process 108 applications within the required
processing period, as shown in Table 2. However, based on PETS
data, the branch did not automatically enroll or appropriately
notify 100 of these applicants as required, and automatically
enrolled only eight into the program. Although we recognize
that these applications represent a relatively small proportion of
the total number of applications the branch processed in federal
fiscal year 2006, our review identified a variety of weaknesses
that could affect the branch’s processing of other applications.
When the branch does not process applications in a timely
7 This adjustment is not reflected in the ending inventory shown in Table 1 on page 19
because the table is based on the Bureau of State Audits’ analysis of PETS and not the
branch’s inventory report.
22 California State Auditor Report 2006-110
manner and does not automatically enroll or appropriately
notify applicants, it may prevent or delay some eligible providers
from delivering services to Medi-Cal beneficiaries.
TAble 2
Applications Processed After the
Respective Due Date Had lapsed
Number of
Applications
the branch
Failed to
Outcome of late Processing
Type of Process on Percent
Application Time of Total Approved Denied Returned* Referred
Resubmitted 61 57% 25 14 3 19
Preferred
provider 10 9 0 0 10 0
Regular 37 34 10 2 1 24
Totals 10 100% 16 1
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch)
Provider Enrollment Tracking System (PETS).
Note: As we mention in the Scope and Methodology section of this report, we were
unable to determine the accuracy of certain data fields in PETS because the branch
does not maintain copies of all applications for which it enters information into PETS.
In addition, certain data fields in PETS may be populated by branch staff using their
judgment and certain information on applications the branch did maintain were
inconclusive. Thus, these data are of undetermined reliability.
* Returned applications include those that the branch determined to be deficient
or needlessly submitted by an existing rendering provider, or were withdrawn by
the applicant.
As shown in Appendix A, according to PETS data, about
two-thirds of these applications were for physicians seeking
enrollment into Medi-Cal. The branch did not process these
applications within the required time periods, which are listed
in the text box on the following page, for several reasons. For
instance, some applications remained in certain units within
the branch, such as its policy and administrative section (policy
section), for up to four months, while others awaited the final
review and approval of branch managers for several days. These
times are longer than those stated in branch policy. Specifically,
effective November 2005, in an effort to ensure that branch
staff review and process applications on or before the review
due date, the branch instituted an internal policy that requires
staff to submit applications recommended for denial to the
policy section at least 40 days before the review due date,
California State Auditor Report 2006-110 2
requires the policy section to review and submit these
applications to section chiefs at least 10 days before the
Days Within Which Applications
Must be Processed or Referred, review due date, and requires section chiefs to approve
upon branch Receipt all applications recommended for denial at least five days
before the application review due date. According to the
• Provider application: 180 days
chief of the policy section, the branch does not track the
• Preferred provider application: 90 days
length of time applications remain in the policy section.
• Resubmitted application: 60 days Additionally, the chief of the branch stated that some
applications are not processed within the required time
Source: California Welfare and Institutions
Code, Section 14043.26. period because branch staff sometimes enter an incorrect
“application received” date into PETS, which may result
in an incorrect default date.
The branch’s policy of not tracking the length of time
applications remain in the policy section caused some applicants
whose applications were recommended for denial to be enrolled
into Medi-Cal automatically because they were not processed
within the required time period. When branch staff recommend
that an application be denied, they generally are required to
forward the application to the policy section to ensure that
the determination is accurate and supported. Branch staff
are instructed to enter into PETS the date they forwarded the
application to the policy section, but PETS does not track how
long an application remains there, and some applications stay in
the policy section longer than the benchmark of 30 days that is
stated in branch policy. Of the seven applications we reviewed
that had been recommended for denial, each remained in the
policy section after their respective due dates had lapsed, and
thus the branch automatically enrolled the applicants into the
program. Although the branch can remove these applicants
from Medi-Cal while on provisional status if they fail to meet
the standards for enrollment, they may submit claims for
services provided to Medi-Cal beneficiaries from the date the
branch received their application to the date of termination
from the program. The department may recover payments made
to ineligible providers, but it incurs additional costs when it
must do so for providers who should have been denied during
the enrollment process.
According to the chief of the policy section, more detailed
tracking of the length of time applications remain in the policy
section could help reduce the risk that some applications
recommended for denial will be enrolled automatically because
they were not processed within the required time period. For
instance, he indicated that a report displaying certain additional
dates would assist the branch in preventing the automatic
2 California State Auditor Report 2006-110
enrollment of applicants that it otherwise would deny. The
report could include the date the application was submitted
to the policy section, the date by which the application
must be processed, the date the policy section made its final
determination on the application, and the date the policy
section provided the determination on the application to
branch staff to draft the denial letter. He stated that this type of
report would be valuable in helping the branch avoid having
to enroll applicants automatically that it otherwise would
deny. Additionally, a report listing these dates could help the
department decrease the number of claims it pays to ineligible
providers who otherwise would not have been enrolled
in Medi-Cal.
Branch staff did not always enter the correct dates into PETS,
which hinders the branch’s ability to accurately track the
status of applications it reviews. This problem also was noted
Despite concerns the in the bureau’s May 2002 audit report titled Department of
bureau raised in a Health Services: It Needs to Significantly Improve Its Management
May 2002 audit that of the Medi-Cal Provider Enrollment Process, Report 2001-129,
branch staff were not which recommended that the branch determine whether its
entering data accurately staff are entering data accurately and consistently into PETS.
and consistently into In the bureau’s December 2003 audit report titled Department
PETS, we noted that of Health Services: It Needs to Better Plan and Coordinate Its
branch staff continue to Medi-Cal Antifraud Activities, Report 2003-112, in response to
enter data incorrectly. the bureau’s follow-up on the branch’s implementation of this
recommendation, branch management acknowledged that staff
still may not enter the required or correct data.
During the fieldwork for this report, our detailed review of
applications that the branch appeared to process after the
required end of their time periods found that branch staff
continue to omit dates and enter incorrect dates into PETS.
Specifically, of the 179 applications that the branch appeared to
process after the required period, 27 were actually processed on
time but appeared to be late because branch staff had entered
incorrect dates into PETS, such as the date the application was
received and the date by which the branch must complete
processing of the application. An additional 13 applications that
the branch appeared to process after the required period were
entered inadvertently into PETS by branch staff as duplicates of
other applications, and were not removed from PETS until long
after the original applications’ due dates had lapsed. Further,
in reviewing PETS data we noted 15 other applications that
appeared to be long overdue and still were pending review as
of September 30, 2006, while an additional 41 applications
California State Auditor Report 2006-110 2
appeared to be denied, but were still in process, in PETS. The
applications remained open because branch staff did not enter
the date on which they completed processing them. These
errors hinder management’s ability to track the status of these
applications accurately.
Further, incorrect data in PETS led to improper handling of
four resubmitted applications. These resubmitted applications
contained deficiencies that the applicants had failed to
remediate. However, because the applications had not been
Because four applications identified appropriately in PETS as being returned to the
were not appropriately applicant, branch staff did not deny these applications,
identified in PETS as as required by state law, but instead returned them to the
being returned to the applicants for remedy a second time after the 60-day processing
applicant, branch staff period had lapsed. Each of these applicants resubmitted their
did not deny these applications and each subsequently was enrolled into Medi-Cal.
applications, as required Consequently, the branch not only did not process these
by state law, but instead applications in accordance with state law, but it provided
returned them to the these applicants with an additional opportunity to remedy
applicants for remedy a deficiencies after the 60-day processing period had lapsed that
second time. other applicants were not offered. However, the benefits of
offering these applicants an additional opportunity to remedy
deficiencies are noteworthy, given that all ultimately were
approved and able to provide services to beneficiaries sooner
than they otherwise would have had the branch denied their
applications in accordance with the law.
Although some applications are subject to secondary reviews by
branch managers and more experienced staff, these reviews
do not identify PETS errors like the ones just described.
According to the chief of the branch, a secondary review
is not always done when branch staff correspond with an
applicant, such as sending a deficiency letter, or when branch
staff enter application information in PETS, including the date
the application was received. In fact, he explained, a secondary
review is most likely to take place when new branch staff process
an application. However, if branch management included
in their secondary reviews of applications periodic reviews
to ensure that staff are accurately and consistently entering
the dates that the branch received, processed, or returned the
application into PETS, the branch could gain assurance that
the management reports it generates from PETS, described
previously, contain accurate and complete information on
the status of applications. This could improve the branch’s
capability to identify accurately those applications that are
approaching their required processing timelines.
26 California State Auditor Report 2006-110
Additionally, the branch was unable to locate two of the
179 applications that it appeared to process after the required
The branch was unable period. According to the chief of the branch’s allied and
to locate two applications physician section, the branch probably misplaced these
it subsequently closed in applications shortly after it received them. She explained that for
PETS, possibly preventing one application, the branch tried unsuccessfully to contact the
two applicants from applicant to request another application. She could not explain
providing services to what happened to the other application. As a result, the branch
Medi‑Cal beneficiaries. closed the applications in PETS, possibly preventing two eligible
applicants from providing services to Medi-Cal beneficiaries.
Further, we determined that PETS contains fictitious provider
records, created as the result of staff training and branch
testing of PETS, commingled with its production data. Best
practices would dictate that staff training and branch testing
of PETS should not occur in the production environment.
Typically, it would occur in an environment that simulates
the production environment, thus protecting the integrity
of the production data. We identified 166 fictitious provider
records in PETS data provided by the branch. As a result, we
further question the integrity of PETS. The fictitious data will
have to be removed from all branch management reports
produced based on data from PETS. We did not include these
records in our analysis of PETS for this report.
Finally, in a December 2006 feasibility study report, the branch
recognized that PETS does not meet its current business needs
and proposed a new system to address this and other problems.
The branch specifically noted that PETS lacks key functionality
such as timeliness alerts and that the branch’s current processes
contribute to high error rates associated with key data entry
and lost documents. In response to these and other concerns,
the proposed system will allow for the electronic submission
of Medi-Cal provider applications and certain other integrated
capabilities, which the branch anticipates will increase its
ability to process them more efficiently. Under the current plan,
which still requires budgetary approval, the branch projects
a September 2009 implementation date for the new system.
However, the types of problems previously described will
continue if branch staff enter incorrect information into the
new system.
California State Auditor Report 2006-110 2
The Branch generally Identifies deficient applications
promptly, but many applicants do Not Resubmit corrected
applications on Time
Although the branch does not track the number of deficient
applications it identifies, or the reasons for the deficiencies, it
generally notifies applicants early in the required processing
period that their applications are deficient. Because the
branch does not track this information in PETS, we sampled
120 deficiency letters sent to applicants during federal fiscal
year 2006. Our review of these letters found that the branch
notified nearly 90 percent of applicants that their applications
contained deficiencies before the 80th day of the required
180-day processing period.
Based on this same review, and as shown in the text box,
the leading reasons for deficient applications include
Most Common Reasons for
applicants’ failure to submit required documents and
Deficient Applications During
Federal Fiscal Year 2006 submission of incomplete or illegible forms. For instance,
when applicants fail to submit a copy of their driver’s
• Applicant failed to submit required
license or proof of their tax identification number, the
document(s): 106
branch returns the application, citing that the applicant
• Applicant’s form(s) illegible or
failed to submit the required documents. On the other
incomplete: 61
hand, an application containing an incomplete disclosure
• Applicant ineligible for enrollment: 4
statement will be returned to the applicant citing the
• Application inconsistent with
forms were incomplete.
state records: 8
Source: Sample of 120 deficiency Figure 3 displays the branch’s procedures for handling
notification letters, some of which had
deficient applications. Once an applicant receives
multiple deficiencies.
written notification that the application is deficient, the
applicant must resubmit the application within 35 days.
If the application is resubmitted after 35 days, state law
requires the branch to deny the application and treat it as a new
application. If applications are resubmitted within the 35-day
period and the noted deficiency is remedied, the branch must
process the application package within 60 days.
In comparison, the federal Medicare program gives applicants
60 days to remedy their deficient applications—25 days longer
than Medi-Cal’s time frame. This additional time could benefit
Medi-Cal applicants who resubmit their applications shortly
after the required 35-day time period ends. We reviewed
the effect that a longer time frame would have, focusing on
applicants that resubmitted their applications 11 to 25 days
2 California State Auditor Report 2006-110
FIgURE 3
The branch’s Procedures for Handling Deficient Applications
Applicant submits
application to enroll
in Medi-Cal
If the deficiency is easily Analyst determines
remedied by faxing application is deficient
additional documents, within 180 days
analyst calls applicant and
allows 48 hours to remedy,
and if received within
48 hours, will continue
processing on 180-day
time frame
If applicant fails to If the deficiency is If applicant responds
respond within 35 days, complicated or within 35 days but fails to
the original case is denied applicant does not fax remedy the deficiency,
by the analyst. Any remedy in 48 hours, the application is
resubmission after this analyst sends deficiency forwarded to the policy
time receives a new letter; applicant has section for denial
document number and is 35 days to respond
considered a new case,
with a new 180-day
processing period
If applicant responds
within 35 days and
remedies the deficiency,
the resubmission receives
a new document number
and is subject to a 60-day
processing period
Sources: California Welfare and Institutions Code, Section 14043.26, and the Department of Health Services’ policy.
after the 35-day time period, to allow for possible mail delays.
According to PETS data, of the 658 applicants that resubmitted
their applications 11 days or more after the 35-day period
during federal fiscal year 2006, 258 (39 percent) resubmitted
them within 11 to 25 days and 126 of these ultimately were
approved.8 However, because the branch treated these as
new applications subject to the 180-day review period, these
applicants were prevented from providing services to Medi-Cal
beneficiaries as early as they otherwise could have. In fact,
the branch took up to an additional 108 days, or about three
8 As we mention in the Scope and Methodology section of this report, we were unable
to determine the accuracy of certain data fields in PETS because the branch does not
maintain copies of all applications for which it enters information into PETS. In addition,
certain data fields in PETS may be populated by branch staff using their judgment
and certain information on applications the branch did maintain were inconclusive.
Thus, these data are of undetermined reliability.
California State Auditor Report 2006-110 2
and a half months, to approve these applications. Had state
law authorized the branch to process these resubmitted
applications within a 60-day time frame rather than a new
180-day time frame, a greater number of eligible providers
could have provided services to beneficiaries sooner than they
otherwise did.
Based on our review, we noted that the branch processed
most resubmitted applications in a timely manner. Of the
2,973 applications that PETS indicates were resubmitted within
the 35-day time period and processed during federal fiscal
year 2006, the branch processed 2,912, or 98 percent, on time.
Of the 61 applications that the branch did not process within
the required 60-day time period, it appropriately notified eight
that they were enrolled into the program automatically and
placed on provisional status, but did not notify the remaining
53 applicants regarding the status of their applications within
the required time period.
As we mentioned earlier, the branch must deny those
The main reason applications that are resubmitted after the required 35-day
the branch denied period, or not resubmitted at all. In fact, this is the main reason
applications during the branch denied applications during federal fiscal year 2006.
federal fiscal year 2006 is As shown in Figure 4, of the 2,584 applications that PETS
because applicants failed indicates the branch denied, 1,365, or 53 percent, were denied
to resubmit remedies to because the applicants failed to resubmit in a timely manner,
their applications in a or did not resubmit at all. According to PETS, other reasons
timely manner, or did not that the branch denied applications, also shown in Figure 4,
resubmit at all. include submitting an outdated or inappropriate form, failure
to remediate discrepancies in the application, and lack of an
established place of business.
Although PETS indicates that the second leading reason for
denials is the submission of an outdated or incorrect form, the
branch does not adequately inform applicants of this problem,
which increases the number of applications it ultimately
reviews and denies. According to the chief of the branch, several
billing companies and credentialing departments, such as large
provider groups and some hospitals affiliated with universities,
may have an inventory of old applications on file, which their
staff complete and submit on behalf of providers rather than
using the most current application forms available on the
department’s Web site.
0 California State Auditor Report 2006-110
FIgURE 4
Reasons Why Applications Were Denied
During Federal Fiscal Year 2006
No established place
of business—93 (3%)
Other*—207 (8%)
Failure to remediate
discrepancies—361 (14%)
Failure to
respond within
the allowed time
or did not
respond at all–
1,365 (53%)
Failure to submit appropriate
or current form—558 (22%)
Source: Bureau of State Audits’ analysis of data from the Provider Enrollment Branch’s
(branch) Provider Enrollment Tracking System (PETS).
Note: As we mention in the Scope and Methodology section of this report, we were
unable to determine the accuracy of certain data fields in PETS because the branch
does not maintain copies of all applications for which it enters information into PETS.
In addition, certain data fields in PETS may be populated by branch staff using their
judgment and certain information on applications the branch did maintain were
inconclusive. Thus, these data are of undetermined reliability.
* Includes applicants who do not hold the required license, failure to disclose required
information in the application packages, fraud and abuse.
Despite this issue, the department’s Web site does
not list problems with forms as being among the
Most Common Reasons for Denying
main reasons applications are denied, as shown in
Provider Applications, According to the
Department’s Web Site the text box. The chief of the branch explained that
it has presented this issue to provider associations
• Failure to respond timely.
and forums, and he agreed that the Web site should
• Failure to remediate discrepancies. be updated to reflect that use of the incorrect form
• Fraud and abuse. is a common cause for denial. When the branch
• No established place of business. does not notify applicants adequately that using
old applications will result in denial of application
• Failure to disclose required information in
the application package. packages, it increases the number of applications it
• Provider does not hold the required license. must process and ultimately deny, and thus increases
the length of time it takes some eligible providers
Source: Department of Health Services’ to enroll in Medi-Cal. In turn, this may delay some
Web site.
beneficiaries’ access to Medi-Cal providers.
California State Auditor Report 2006-110 1
preferred provider Status offers Few Benefits to applicants
The only benefit to an applicant of qualifying for preferred
provider status is that the branch must process the application
within 90 days instead of 180 days. Additionally, the
application processing delays that led to the state law, effective
January 1, 2004, that created preferred provider status generally
no longer exist. As described previously, according to PETS,
the average number of days the branch took to process an
application ranged from 30 to 69 days during federal fiscal
year 2006, causing the 90-day processing period to appear
irrelevant. Preferred provider status also has a drawback for those
providers ultimately approved for it, because state law requires
the provider to remain on provisional status for 18 months—
six months longer than applicants who enroll through the
usual process and are subject to the 180-day review period.
Given that the benefits this status offers applicants appear to be
marginal, the value of the status is questionable.
TAble
Reasons the branch Denied Preferred Provider
Status to Applicants Seeking enrollment into
Medi-Cal During Federal Fiscal Year 2006
Reason for Denial Total Number Percent
Applicant was an active Medi-Cal rendering
provider and did not need to apply 28 43%
Applicant failed to submit the required cover
letter and documentation 19 29
Applicant submitted an incomplete cover letter
and documentation 13 20
Applicant submitted an incomplete application
package 5 8
Totals* 6 100%
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch)
Provider Enrollment Tracking System (PETS) and review of a sample of 60 applications
requesting preferred provider status for which the status was ultimately denied.
Note: As we mention in the Scope and Methodology section of this report, we were
unable to determine the accuracy of certain data fields in PETS because the branch
does not maintain copies of all applications for which it enters information into PETS.
In addition, certain data fields in PETS may be populated by branch staff using their
judgment and certain information on applications the branch did maintain were
inconclusive. Thus, these data are of undetermined reliability.
* The total number shown above is 65 because five applicants failed prescreening for
more than one denial reason.
2 California State Auditor Report 2006-110
Very few applicants seeking enrollment as Medi-Cal providers
benefit from preferred provider status. Specifically, PETS
indicates that in federal fiscal year 2006, only 578, or 4 percent,
of the 14,166 physicians seeking enrollment into Medi-Cal
applied for preferred provider status. Of these applicants, the
branch identified only 45 qualified for the 90-day application
process, of which just 23 ultimately were approved for
enrollment. Additionally, we noted that many applying for
preferred provider status already were enrolled as rendering
providers and subsequently were denied simply because they
no longer were required to submit an application package when
changing location or provider group.
Although the branch does not track the reasons
that applicants are approved or denied preferred
Five locations Most Commonly Reported
by Those Applying for Preferred provider status, we were able to review checklists
Provider Status that branch staff use when prescreening applicants
to determine whether they qualify for the 90-day
1. University of California, San Francisco: 186
application process. We randomly sampled
2. San Francisco, Sunset District: 58
60 applications requesting preferred provider status
3. San Diego: 37 to determine why they did not pass the prescreening.
4. Elk Grove: 31 As shown in Table 3, nearly half of the applications
5. San Jose: 26 we reviewed were denied because they were from
rendering providers who did not even need to
Five Specialties Most Commonly apply, and nearly one-half of the applications were
Reported by Those Applying for incomplete or did not contain the required cover
Preferred Provider Status
letter or documentation to support the applicant’s
eligibility for preferred provider status.
1. Radiology: 36
2. Internal medicine: 35
As shown in the text box, according to PETS, of the
3. Anesthesiology: 30
578 applicants who did apply for preferred provider
4. Pediatrics: 30
status, 186, or 32 percent, were from the University
5. Surgery (general): 17 of California, San Francisco, and the cumulative total
for the five most common locations accounted for
Sources: Bureau of State Audits’ analysis of the
338, or 58 percent, of those applying for preferred
Provider Enrollment Branch’s (branch) Provider
Enrollment Tracking System (PETS) and review provider status. Further, according to our review
of application packages. of their application packages, the most common
Note: As we mention in the Scope and specialties for those applying include radiology and
Methodology section of this report, we were
internal medicine.
unable to determine the accuracy of certain
data fields in PETS because the branch does not
maintain copies of all applications for which Although the application processing delays that led
it enters information into PETS. In addition,
to the state law creating preferred provider status do
certain data fields in PETS may be populated by
branch staff using their judgment and certain not currently exist, such delays could arise in the
information on applications the branch did
future. If this were to occur, and given the branch
maintain were inconclusive. Thus, these data are
of undetermined reliability. denied preferred provider status to more than half
of the applicants in Table 3 because their application
California State Auditor Report 2006-110
packages were incomplete or did not contain the required
documents, it appears the branch should increase its efforts to
convey to prospective applicants that their application packages
will be denied if they lack these elements. Consequently, the
branch could see a decrease in the number of applications it
denies during the prescreening stage for preferred provider
status, and thus increase the number of applicants who could
benefit from the shorter processing time the status offers.
ThE BRaNch’S REaSoNS FoR REFERRINg
appLIcaTIoNS Lack SpEcIFIcITy, aNd REFERREd
appLIcaTIoNS REmaIN IN pRocESSINg FoR
LoNg pERIodS
The department is authorized to conduct, and the branch may
request, additional reviews of applicants seeking enrollment
into Medi-Cal to verify the accuracy of information provided
in their application packages. However, the branch does not
adequately track which of the department’s review units it
refers applications to or the reasons for these referrals. As a
result, it may not be using its enrollment process effectively to
help detect trends in Medi-Cal fraud. Further, state law does
not prescribe the number of days within which the branch
must approve or deny an application it has referred for further
review. In fact, according to PETS data, we noted that the
average number of days to process applications that the branch
referred in federal fiscal years 2004 and 2005,
from the date it received them to the date it made
units Within the Department to Which
its final determination, was 322 and 255 days,
Applications Are Referred
respectively. Moreover, most applications the
Medical Review branch: To conduct on-site branch referred and processed during federal fiscal
inspections or reviews to verify applicant information. year 2006 ultimately were approved.
Provider enrollment branch: To conduct additional
research, often into processing procedures for
provider types that are not already outlined in The Branch Refers applications to various Units
statutes or regulations, in order to determine the
for Further Review but does Not Track Referral
statutory authority for enrollment when there
is not enough time remaining in the required Information adequately
processing period.
The branch may refer applications to other
Office of legal Services: To determine if an
applicant’s license status or past legal issues make him units within the department, as well as to
or her ineligible to be a Medi-Cal provider. analysts within the branch itself, to conduct
licensing and Certification Program: To ensure background checks to verify the accuracy of
that applicants, such as clinics, have appropriate
information provided to the department and to
licenses to operate as the provider type for which
they are applying. prevent fraud and abuse if it finds discrepancies
during the enrollment process. These secondary
Source: Provider Enrollment Branch management. reviews may include on-site inspection before
enrollment, review of business records, and data
California State Auditor Report 2006-110
searches. As the text box shows, the branch generally refers
applications to several units within the department for various
reasons. However, the branch failed to enter the units to which
it sent 10 percent of the applications it referred in federal fiscal
year 2006. Thus, we determined that PETS data relating to the
units to which the branch referred applications for secondary
review are not reliable because this data was not fully populated.
The chief of the branch explained that this could prevent
the branch from tracking the status of applications referred
for secondary review. Further, in federal fiscal year 2006, the
majority of the branch’s 598 referrals were to the Medical Review
Branch within the department’s Audits and Investigations
division, as shown in Figure 5 on the following page.
Once the branch refers an application for further review,
state law does not prescribe the number of days within which
the department must complete its review. When the unit
to which the application was referred completes its review
activities and reaches a determination regarding whether to
recommend that the branch approve, deny, or seek additional
information from the applicant, it returns the application
to the branch. The branch is then responsible for reviewing
the recommendation and making a final determination on the
status of the application.
Although the branch uses specific review checklists and fraud
indicators to process applications that appear questionable or
suspicious, these checklists and fraud indicators generally do not
align with the reasons the branch ultimately gives for referring
applications in PETS. Branch staff are instructed to
review applications using a streamlined checklist,
Most Common Reasons Applications but if they identify a fraud indicator they are to
Are Referred, as Recorded in PeTS switch to a high-risk checklist.
Mandated On-Site Visit: The branch
Although the high-risk checklist and fraud
automatically refers applicants from certain
provider types previously identified as high-risk, indicators specify reasons on which to base
such as durable medical equipment providers
the decision to refer an application, such
or certain nonchain pharmacies located in
Los Angeles. Also, the Medical Review Branch as the department’s previous experience with
requests that the branch refer certain applicants the applicant, these reasons do not align with the
each time they apply.
reasons available in PETS for staff to choose when
Suspicious: An analyst feels uncomfortable
referring an application. These reasons are shown
processing an application and has justifiable
reasons for his or her concerns, such as a in Table 4 on page 37, and some are explained
conversation with an applicant that raises doubts. further in the text box. Although branch staff
attach a memorandum to each application they
Source: Provider Enrollment Branch management.
refer for further review that describes the reason
for the referral and outlines the specific items
California State Auditor Report 2006-110
FiguRe
Number of Referrals by Referral unit
During Federal Fiscal Year 2006
Office of Legal Services— Laboratory Field Services—
36 (6%) 9 (2%)
Licensing and Certification—
39 (6%)
Provider Enrollment Branch—
41 (7%)
Not given— Audits and
62 (10%) Investigations,
Medical Review
Branch—
409 (69%)
Source Bureau of State Audits’ analysis of data from the Provider Enrollment Branch’s
(branch) Provider Enrollment Tracking System (PETS).
Note: As we mention in the Scope and Methodology section of this report, we were
unable to determine the accuracy of certain data fields in PETS because the branch
does not maintain copies of all applications for which it enters information into PETS.
In addition, certain data fields in PETS may be populated by branch staff using their
judgment and certain information on applications the branch did maintain were
inconclusive. Thus, these data are of undetermined reliability.
Note: Two referrals to the Medi-Cal Fraud Prevention Bureau are not included in
this figure because they represent less than 1 percent of the total number of referrals,
however, they are included in the total number of referrals in Table 4.
it would like the secondary review to address, these items are
not captured in PETS. Rather, the common reasons for referring
an application in PETS are not clearly tied to the branch’s fraud
indicators and high-risk checklists, or lack specificity, which
hinders the branch’s ability to track potential trends in fraud
accurately. If the branch were to align the reasons available in
PETS with its fraud indicators and high-risk checklists, it could
better track the appropriateness of its high-risk checklists and
update the fraud indicators as trends in fraud change over time.
6 California State Auditor Report 2006-110
TAble
Applications Referred by Provider Type and Reason for Referral
Federal Fiscal Year 2006
Provider
Type as a
Percentage
Reason for Referral†
of Total
Mandated Change Applications
On-site Not Pre- Address of All Percentage Received in
Provider Type* Visit Suspicious Other given enrollment Change Owner Others Totals of Total Year
Physician 10 57 52 43 28 11 3 23 227 38.0% 60.3%
Pharmacy/
pharmacist 58 14 0 0 1 1 5 2 81 13.5 4.1
Nonmedical
practitioner 2 13 14 16 0 9 3 7 64 10.7 9.0
Medical
transportation
ground 40 0 0 0 0 7 4 1 52 8.7 0.6
Physician group 3 14 6 8 6 2 1 3 43 7.2 7.7
Clinic (exempt
from license) 7 0 0 0 26 0 0 0 33 5.5 0.1
Durable medical
equipment 22 8 0 0 0 0 0 1 31 5.2 1.8
Other 12 21 5 10 12 1 6 0 67 11.2 16.4
Totals 1 12 1 22 100.0% 100.0%
Percentages
of Total
Referrals 2.% 21.2% 12.% 12.% 12.2% .2% .% 6.2% 100.0%
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch) Provider Enrollment Tracking System (PETS).
* Because we found that the error rate of the provider type field in PETS may be as high as 15.7 percent, we consider the
information presented here to be not sufficiently reliable for determining the provider type. Consequently, using the branch’s
provider type information as the basis for determinig an applicant’s provider type could lead to incorrect conclusions. The
purpose of displaying it is to show how the branch could use its current system to provide relevant information if it maintains
accurate data.
† As mentioned in the Scope and Methodology section of this report, we determined that the data relating to the reasons the
branch refers applications for secondary review are not sufficiently reliable since the data were not fully populated.
The available reasons in PETS for referring applications likely
need updating. As shown in Table 4, nearly 13 percent of the
applications referred by the branch give “other” as the reason,
indicating that the referral reasons in PETS are no longer
appropriate. Further, branch staff did not assign a reason
for referring almost another 13 percent of the applications.
Additionally, the chief of the policy section noted that three
of the common reasons we found in PETS for referrals—
“pre-enrollment,” “address change,” and “change of owner”—
were problematic. He stated that these terms more accurately
reflect the type of application being referred than the actual
California State Auditor Report 2006-110
reason for the referral. Consequently, nearly one-half of the
In federal fiscal year 2006 referred applications were prompted by five reasons that lack
nearly one‑half of the specifics for the referral, and another half are referred for
referred applications were reasons that do not clearly tie to its fraud indicators or high-risk
prompted by reasons checklists. Therefore, the branch is not adequately tracking the
that lack specifics for reasons for referring applications. This shortcoming prevents
the referral, and another it from contributing to the department’s Medi-Cal fraud
half were referred for prevention efforts on an ongoing basis because it is unable to
reasons that do not accurately detect and track potential trends in fraud during the
clearly tie to the branch’s enrollment process.
fraud indicators or
high‑risk checklists.
The department Takes an Inordinate amount of Time to
process Some applications That the Branch Refers, although
many Referrals Ultimately are approved
As we mentioned earlier, state law does not prescribe the
number of days within which the department must complete
additional review activities, such as conducting background
checks and unannounced visits, on applications referred by the
branch. Despite the lack of a required review period, our legal
counsel has advised us that the units to which the branch refers
applications, including the branch itself, have an obligation
to make a good-faith effort to complete their review activities
within a reasonable amount of time. However, in reviewing
the applications the branch either reviewed itself or referred in
federal fiscal years 2004 through 2006, we noted that the branch
and the units to which it referred these applications took an
inordinate amount of time to complete their additional review
activities and reach a final determination on the applications,
and they had yet to complete processing others. For those
providers whose applications were referred and ultimately
approved, these lengthy processing times may have delayed
their ability to provide services to Medi-Cal beneficiaries.
For instance, and as shown in Table 5, PETS indicates the average
number of days to make final determinations on applications
the branch referred in federal fiscal years 2004 and 2005 was
322 days—or nearly one year—and 255 days—or almost nine
months—respectively. In fact, according to PETS, three of the
applications the branch referred in federal fiscal year 2004 were
still in process as of September 30, 2006—averaging 1,048 days,
or almost three years, of processing time—while 134 of the
California State Auditor Report 2006-110
TAble
Number of Applications Referred by Year and Processing Outcome*
Total Number Number Average Number Average Number of
Federal of Applications Number Number Returned to Number of Days to Final Days in Process, as of
Fiscal Year Referred Approved Denied Applicant in Process Determination* September 0, 2006*
200 773 277 416 77 3 322 1,048
(35.8%) (53.8%) (10.0%) (0.4%)
200 919 282 259 244 134 255 582
(30.7%) (28.2%) (26.5%) (14.6%)
2006 598 191 51 78 278 215 234
(31.9%) (8.5%) (13.1%) (46.5%)
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch) Provider Enrollment Tracking System (PETS).
Note: As we mention in the Scope and Methodology section of this report, we were unable to determine the accuracy of
certain data fields in PETS because the branch does not maintain copies of all applications for which it enters information into
PETS. In addition, certain data fields in PETS may be populated by branch staff using their judgment and certain information on
applications the branch did maintain were inconclusive. Thus, these data are of undetermined reliability.
Note: These numbers may include some applications belonging to a provider group that the branch typically refers, denies,
approves, or returns concurrently as a cluster. Thus, some of the final processing outcomes could reflect the branch making a final
determination on a large provider group that included several applications.
* Average number of days to final determination is calculated by averaging the differences between the dates on which
applications were received and the dates on which they were approved, denied, or returned to applicants. Average number of
days in process applies only to applications identified as being in process in the table.
applications the branch referred in federal fiscal year 2005 were
still in process as of September 30, 2006—averaging 582 days, or
nearly 20 months in processing time.9
Similarly, in federal fiscal year 2006, the branch approved the
majority of applications it referred for further review and made
a final decision. As shown in Table 5, according to PETS data,
the branch ultimately approved 191 and denied just 51 in that
year. Our analysis of PETS data indicated that for only those
191 applications the branch approved, it took an average of
209 days after it received them to do so—or 29 days longer than
the general 180-day processing period and significantly longer
than the 30- to 69-day range for processing regular applications
in federal fiscal year 2006.
9 As we mention in the Scope and Methodology section of this report, we were unable
to determine the accuracy of certain data fields in PETS because the branch does not
maintain copies of all applications for which it enters information into PETS. In addition,
certain data fields in PETS may be populated by branch staff using their judgment and
certain information on applications the branch did maintain were inconclusive. Thus,
these data are of undetermined reliability.
California State Auditor Report 2006-110
In addition to the analysis shown in Table 5 on the previous
Of the applications the page, we also reviewed those referred applications, including
branch referred and those referred in years before federal fiscal year 2006, for which
made a final decision processing, including the secondary review, was completed
to approve or deny, it during federal fiscal year 2006. According to PETS data, the
approved 191—taking department took an average of 233 days to process them
an average of 209 days from the date the branch referred them. Additionally, these
to do so—and denied referred applications remained in the enrollment process for
just 51, in federal fiscal an average of 318 days, ranging from 28 days to 1,178 days,
year 2006. from the date the branch received them to the date it made
a final determination on the status of the applications. Of
the applicants in this group that ultimately were approved or
denied, based on PETS data, the branch approved 69 percent
as Medi-Cal providers, in one case taking up to 1,007 days, or
nearly three years, to approve the application.
According to the chief of the branch, the success or benefit
derived from a referred application is not limited to denying
applications and thus stopping the enrollment of high-risk
providers. Rather, he explained, referrals, even if they result in
approved applications, also serve as a deterrent to those intent
on committing fraud and abuse. He stated that when referred
applications are approved they may nonetheless be referred
by the department to the California Medical Board or placed
on special claims review when the applicant is enrolled as a
provisional provider. Special claims review is a control the
department uses to ensure that providers are filing accurate
Medi-Cal claims by requiring them to submit documents to
substantiate the nature, extent, and medical necessity of the
services claimed. According to the chief of the case development
unit within the Medical Review Branch, it is not common for
applicants to be placed on special claims review when approved
for enrollment. In fact, she stated that just seven approved
applicants were placed on special claims review between
October 1, 2005, and September 30, 2006. Additionally, she
pointed out that five others were sent a letter identifying areas of
correction that required their attention. The limited number of
these additional levels of review calls into question the branch’s
referrals that ultimately were approved in federal fiscal year
2006, particularly because the branch’s reasons for referring
applications in PETS lack specificity.
The importance of the branch’s ability to identify and refer those
applications that are potentially high risk, and to adequately
track referral reasons in PETS, has increased due to a recent shift
in the priorities of the Medical Review Branch. Specifically, in
0 California State Auditor Report 2006-110
the department’s 2005 Medi-Cal payment error study—which
is intended to aid the department in its efforts to detect and
prevent fraud and abuse in Medi-Cal as well as to help it develop
appropriate fraud control strategies—it identified high-risk
provider groups and recommended specific actions to review
these groups and deter further abuse. As a result, the Medical
Review Branch reprioritized its review efforts by focusing on
conducting on-site reviews of pharmacies; expanding the
number of investigational and routine field compliance audits
of adult day health care facilities, physicians, and pharmacies;
and providing training to various types of providers to focus
on those parts of Medi-Cal at greatest risk of fraud, waste,
and abuse.
According to the chief of the case development unit within the
Medical Review Branch, since this reprioritization, less time
According to the chief remains for secondary reviews of applications referred to it by
of the case development the branch. As a result, she indicated that there is currently a
unit within the Medical backlog of applications referred for secondary review that the
Review Branch, since it Medical Review Branch has yet to assign to staff. Given this
reprioritized its review backlog and the Medical Review Branch’s new priorities, it is
efforts, less time remains imperative that the branch, with the department’s assistance,
for secondary reviews of align the reasons available in PETS for referring an application
applications referred to it with the fraud indicators on its high-risk review checklists,
by the branch and there and continually evaluate the frequency and applicability of
is currently a backlog of the reasons given in PETS. These efforts could potentially
applications referred for lead to a decrease in the number of applications the branch
secondary review. refers for further review and thus increase the benefit of the
Medical Review Branch’s secondary reviews.
In fact, in the past six months the branch has not held its
regular meetings with the Medical Review Branch, which
served to foster information sharing between the two branches
in a more formal setting than the occasional communication
they may have regarding certain applications. These regular
meetings included managers from the two branches, and topics
discussed included the status of applications the branch had
referred but the Medical Review Branch had not yet processed,
as well as trends in fraud and the fraud indicators. The chief of
the Medical Review Branch stated that the shift in priorities and
special projects had sidetracked the regular meetings. Instead,
the two branches have coordinated their efforts on a more
ad hoc basis to expedite the processing of specific applications.
The chief of the Medical Review Branch stated that the branch
plans to resume these regular meetings in late March. We hope
these meetings do resume, because without this more formal
California State Auditor Report 2006-110 1
level of coordination, we believe the branch and the Medical
Because the Provider Review Branch limit their effectiveness in contributing to the
Enrollment Branch and department’s antifraud efforts because less emphasis is placed on
the Medical Review tracking trends in fraud during the enrollment process.
Branch have coordinated
their application review When the branch refers applications for further review that
efforts on a more ad hoc it later approves, it could be doing a disservice to Medi-Cal
basis, we believe they beneficiaries because access to these providers and the health
limit their effectiveness services they provide may not be as readily available. Moreover,
in contributing to because applicants that the branch refers for secondary
the department’s review may have to wait for the Medical Review Branch to
antifraud efforts. schedule its review, given its other priorities, the department
may delay some eligible providers from providing services to
Medi-Cal beneficiaries.
Finally, referring applications that it later approves indicates
that the branch may need to reevaluate and update the high-risk
indicators it uses when processing applications. To the extent
that these high-risk indicators are no longer current and do
not align with the reasons for referral available in PETS, the
branch’s ability to track the legitimate reasons it has for referring
applications is hindered, decreasing its capability to detect
potential fraud trends during the enrollment process.
ThE dEpaRTmENT may BE aBLE To STREamLINE ITS
appLIcaTIoN pRocESS FoR phySIcIaNS By RELyINg
moRE oN mEdIcaRE daTa
Because applicants seeking to become physician providers in
Medi-Cal and the federal Medicare program are asked to provide
much of the same information in their application packages,
the department may have the opportunity to streamline
some of its enrollment processes for Medi-Cal applicants who
are already Medicare providers by relying more on Medicare
provider information in the near future. The federal government
is beginning two initiatives intended to ensure that more
accurate and updated information is available about Medicare
providers. Specifically, effective November 15, 2006, federal
regulations require Medicare providers to resubmit and recertify
the accuracy of their enrollment information every five years
in order to maintain their billing privileges. In addition,
effective May 23, 2007, federal regulations will require all
health care providers who bill for services to disclose their
National Provider Identifier (NPI) to any entity, when requested,
2 California State Auditor Report 2006-110
to identify themselves as such.10 Thus, the department can
The department may be request applicants to provide their NPI on its Medi-Cal provider
able to rely on some of application, which it plans to do beginning in late May 2007.
Medicare’s data in the Consequently, for those physician applicants it identifies as
near future, instead of being in good standing with Medicare, the department may be
performing redundant able to rely on some of Medicare’s data instead of performing
verification procedures of redundant procedures to verify the same information.
applicant information. Although it is too early to determine the effectiveness of these
two initiatives, it could be worthwhile for the department
to periodically assess Medicare’s progress and the benefits
the department could derive from this centralized source
of information.
The State and the federal government individually administer
the Medi-Cal and Medicare programs, although the two
entities generally perform comparable physician enrollment
procedures and require similar applicant information. In
exercising its authority under state law, and in compliance with
federal Medicaid regulations, the department has established
regulations that require applicants seeking to participate in
Medi-Cal to provide specific information in the application
packages they submit to the branch. These state regulations also
define the applicant information that the branch must verify as
part of its enrollment process. Although Medicaid allows states
to set their own standards for enrolling Medicaid providers,
Medicare’s contractors must follow provider enrollment
standards that are uniform across all states, with the exception
of licensure requirements that vary from state to state.
As shown in Appendix B, Table B.1, beginning on page 52, the
federal government requires physicians seeking enrollment
into the Medicare program to provide 34 of the 44 application
elements that the department requires of Medi-Cal physician
applicants. Further, Medicare verifies in its application review
process most of the information that state regulations require
the branch to verify, as shown in Table B.2 in Appendix B, on
page 54.
Currently, the branch places little reliance on applicant
information supplied by Medicare during its enrollment process.
According to the chief of the branch, his staff use Medicare
information only when they review the U.S. Department of
10 According to the summary text of the Standard Unique Health Identifier for Health
Care Providers final rule by the U.S. Department of Health and Human Services as
published in the Federal Register, the NPI is a unique identifier for health care providers
that will improve the Medicare and Medicaid programs in part by enabling the efficient
electronic transmission of health care provider data.
California State Auditor Report 2006-110
Health and Human Services’ Office of Inspector General on-line
During the enrollment Medicare Exclusion Database to verify that applicants seeking
process, the branch does enrollment into Medi-Cal are not excluded from participating
not require applicants to in Medicare. He explained further that the branch does not
disclose their Medicare require applicants to provide their Medicare billing numbers,
billing numbers and if enrolled. As a result, the branch does not track whether
places little reliance on provider applicants are enrolled in Medicare and could not
applicant information provide us with information that would allow us to determine
supplied by Medicare. the proportion of applicants who were Medicare providers at the
time of application.
Moreover, the branch does not believe it could benefit from
relying on Medicare information, because it believes its staff
perform a more thorough review of applicants than that
conducted by Medicare contractors. However, when we asked
the branch to provide support that its review is more thorough,
it could not provide any statistics or reports to demonstrate that
Medicare’s review was not sufficient.
As part of its antifraud efforts, the department has established
more stringent enrollment procedures than it used in the past.
For instance, to prevent fraudulent providers from enrolling and
remaining enrolled in Medi-Cal, the department tightened the
enrollment process by developing new regulations, applications,
provider agreements, and internal security protocols to ensure
the integrity of the provider enrollment process. A key element
of these efforts is the reenrollment of providers to ensure that
they are in good standing with Medi-Cal and do not present a
high risk of fraudulent billing.
The department has not established a goal or timeline by
which it plans to reenroll all providers. However, as the
Medicare information on physicians becomes more current,
the department may be able to rely more on this information
and spend its time on those elements for which there are
discrepancies between the Medi-Cal application and the
Medicare information or that are unique to Medi-Cal. Although
this streamlining of its physician application process may not
provide large savings on an individual application basis, the
cumulative savings could be significant. To the extent that this
change creates time savings, the branch could allocate more staff
resources to reenrolling current Medi-Cal providers, which could
allow it to reenroll all providers sooner.
California State Auditor Report 2006-110
REcommENdaTIoNS
To ensure that it does not prevent or delay some eligible
providers from delivering services to Medi-Cal beneficiaries,
the branch should ensure that it promptly notifies applicants
that it has automatically enrolled them as provisional Medi-Cal
providers when the branch has not processed the applications
within the required time periods.
The branch should modify PETS data to track the length of time
applications it recommends for denial remain in the policy
section for review, to ensure that it does not automatically enroll
or pay the claims of ineligible providers when the review does
not occur in a timely manner.
Branch management should include in the secondary reviews of
applications periodic reviews to ensure that staff are accurately
and consistently entering the correct dates the branch received,
processed, or returned the application into PETS.
To protect the integrity of PETS data, the branch should remove
all staff training and branch testing data from PETS and include
it in an environment that simulates PETS, thus protecting the
integrity of the production data.
To ensure that the branch does not unnecessarily increase
its workload or prolong the enrollment process for eligible
applicants, it should increase its efforts to notify applicants that
they must use the current and appropriate application forms to
avoid being denied enrollment into Medi-Cal.
The department should seek legislation to revise state law
to extend the 35-day time period applicants have to remedy
deficiencies in their applications to 60 days.
The department should seek legislation to revise state law to
eliminate preferred provider status. However, if it chooses
to keep this status and to increase the number of applicants that
could benefit from the shorter processing period that preferred
provider status offers, the department should increase its efforts
to notify applicants of the reasons it denies applications during
the prescreening for preferred provider status.
California State Auditor Report 2006-110
The branch, with direction from the department, should
align the reasons available in PETS for which it may refer an
application with its fraud indicators and high-risk checklists to
better track the appropriateness of its high-risk checklists and
update the fraud indicators as trends in fraud change over time.
To ensure that it is referring those applicants at greatest risk
of committing fraud and not preventing eligible Medi-Cal
providers from providing services to beneficiaries, the
branch and the Medical Review Branch, with direction
from the department, should reevaluate the appropriateness
of the branch’s high-risk fraud indicators periodically
by consistently communicating and collaborating with
one another.
The branch and the Medical Review Branch, with direction
from the department, should place increased emphasis on
processing those applications referred for further review within
a reasonable time period, to ensure that some eligible Medi-Cal
providers are not unreasonably delayed from providing services
to beneficiaries.
The branch should monitor the implementation of Medicare’s
revalidation process in which it verifies the enrollment
information for all its providers to identify opportunities for
streamlining its application and verification procedures, and
should make modifications as appropriate for Medicare providers
seeking enrollment in Medi-Cal.
The branch should continue its plans to reenroll all its Medi-Cal
providers and add any resources freed up by its streamlining of
its enrollment process. n
6 California State Auditor Report 2006-110
We conducted this review under the authority vested in the California State Auditor by
Section 8543 et seq. of the California Government Code and according to generally accepted
government auditing standards. We limited our review to those areas specified in the audit
scope section of this report.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
Date: April 17, 2007
Staff: Nancy C. Woodward, CPA, Audit Principal
Laura G. Kearney
Avichai Yotam
California State Auditor Report 2006-110
Blank page inserted for reproduction purposes only.
California State Auditor Report 2006-110
Appendix A
Applications the Provider Enrollment
Branch Processed After the Required
Time Periods
The Joint Legislative Audit Committee requested that we
identify the total number of applications that the Provider
Enrollment Branch (branch) did not process within the
required time periods, and to categorize these applications by
type. We reviewed the branch’s Provider Enrollment Tracking
System (PETS) to identify applications that the branch did
not process within the required time periods and analyzed
supporting documentation for each application. Table A on
the following page presents, by physician or nonphysician
application, the number of resubmitted applications subject to
a 60-day review period, preferred provider status applications
subject to a 90-day review period, and general applications
subject to a 180-day processing period that the branch did not
process on time during federal fiscal year 2006.
California State Auditor Report 2006-110
TaBLE a
Applications Processed After Their Due
Date by Type of Application
Number of Applications
the branch Failed to
Type of Application Process on Time Percent of Total
Nonphysicians—Total 36 33%
Resubmitted 19 17
Preferred provider 0 0
Regular 17 16
Physicians—Total 72 67
Resubmitted 42 39
Preferred provider 10 9
Regular 20 19
Physicians who are existing
providers requesting a change
of or additional address* 12
Totals 10 100%
Source: Bureau of State Audits’ analysis of the Provider Enrollment Branch’s (branch)
Provider Enrollment Tracking System (PETS).
Note: Because we found that the error rate of the provider type field in PETS data may be
as high as 15.7 percent, we consider the information presented here to be not sufficiently
reliable for determining provider type. Consequently, using the branch’s provider type
information as the basis for determining an applicant’s provider type could lead to
incorrect conclusions. The purpose of displaying it is to show how the branch could use
its current system to provide relevant information if it maintains accurate data.
* The number of physicians who are existing providers requesting a change of or
additional address are included in the three previous categories, but are presented as a
subset to uniquely identify these types of applications.
0 California State Auditor Report 2006-110
Appendix B
A Comparison of Medi-Cal’s and
Medicare’s Required Application
Elements and Procedures
Used to Verify the Accuracy of
Applicant Information
The Joint Legislative Audit Committee requested that we
compare the Department of Health Services’ (department)
provider application and enrollment procedures to
those used for the federal Medicare program and identify any
similarities and differences in the applications and the process
used to verify provider information. Table B.1 on the following
pages presents the application elements that both the California
Medical Assistance Program (Medi-Cal) and the federal
government require physicians seeking enrollment into the
Medi-Cal and Medicare programs to provide.
As we mentioned in the Audit Results, the department’s Provider
Enrollment Branch (branch) processes applications submitted
by physicians seeking enrollment into Medi-Cal, while the
federal government uses designated fee-for-service contractors
to process applications submitted by physicians seeking to
enroll in the Medicare program. Table B.2, on page 54, presents
the verification procedures used by branch staff and Medicare’s
contractors to confirm the accuracy and legitimacy of the
information applicants provide in their Medi-Cal and Medicare
application packages, respectively.
California State Auditor Report 2006-110 1
TAble b.1
Medi-Cal and Medicare Physician Application elements
Does Medicare
Physician
Provider
Application
Medi-Cal Physician Provider Application element include element?
1 Enrollment action requested Yes
2 Type of entity Yes
3 Applicant’s name Yes
4 Business name Yes
5 Business telephone number Yes
6 Fictitious business name with legible copy of permit Yes
7 Business address Yes
8 Pay-to address Yes
9 Mailing address Yes
10 Medical license number with legible copy Yes
11 Medical specialty(ies) Yes
12 Medicare billing number Yes
13 Taxpayer Identification Number (TIN) with legible copy of Internal Revenue Service form Yes
14 Social Security Number, if sole proprietor not using a TIN Yes
15 Clinical Laboratory Improvement Amendment certificate number with legible copy Yes
16 State laboratory license/registration with legible copy Yes
17 Driver’s license or state-issued identification number and state of issuance with legible copy No
18 Date of birth Yes
19 Gender Yes
20 Local business license numbers and permits with legible copies Yes
21 Seller’s permit number with legible copy or proof of exemption Yes
22 Proof of liability insurance information with legible copy of certificate of insurance for the
address given Yes
23 Proof of professional liability insurance information with legible copy of certificate of insurance
policy or coverage Yes
24 Proof of maintenance of workers’ compensation insurance, if applicable Yes
25 Information on applicant’s hospital privileges No
26 Self-certification and statement of intent to employ a separate billing method for hospital/
clinic-based physician, if practice location is a licensed facility No
27 Original signature of applicant Yes
28 Legal name of applicant as it appears on professional license, if applicable Yes
29 Existing Medi-Cal provider number(s), if applicable No
30 Whether applicant is applying as a rendering provider to a provider group Yes
31 Lease or ownership of place of business information No
32 Fines and debts due to federal, state, or local government related to Medicare or Medicaid No
33 Names and locations of all health care providers in which applicant has an ownership or
controlling interest No
34 Information on conviction, liability, or settlement in lieu of conviction for fraud or abuse in
any government program within the last 10 years Yes
35 Information on past or present participation in Medi-Cal or another state’s Medicaid program No
2 California State Auditor Report 2006-110
Does Medicare
Physician
Provider
Application
Medi-Cal Physician Provider Application element include element?
36 Information on whether applicant has ever been suspended from Medicare, Medicaid, or
Medi-Cal and proof of reinstatement Yes
37 Information on whether applicant has ever had license, certification, or other approval to
provide health care suspended or revoked and written proof from licensing authority of
restored privileges Yes
38 Information on whether applicant has ever lost or surrendered a license, certification, or other
approval to provide health care while a disciplinary hearing was pending Yes
39 Information on whether applicant has ever had a license, certification, or other approval to
provide health care disciplined by any licensing authority Yes
40 Residence address, if applicant is an unincorporated sole proprietor or a rendering provider
adding to a group No
41 Information on all corporations, unincorporated associations, partnerships, or similar
entities having 5 percent or more direct or indirect ownership or controlling interest, or
any partnership interest in the applicant, if the applicant is not an unincorporated sole
proprietor—similar to that required of the applicant in numbers 33 through 36 Yes
42 Information on all individuals having 5 percent or more direct or indirect ownership or
controlling interest or any partnership interest, including all officers, directors, and managing
employees of the applicant—similar to that required of the applicant in numbers 33 through
39 but also including information on any relationships and associations between individuals
and the entities listed in number 41 Yes
43 Information regarding any contracts that the applicant has with subcontractors, along with
information about the subcontractors’ ownership or control Yes
44 Information regarding the applicant’s intent to sell or history of selling incontinence supplies No
Sources: Medicare Enrollment Application for Physicians and Non-Physician Practitioners and the Medi-Cal Physician
Application Package.
California State Auditor Report 2006-110
TAble b.2
Medi-Cal and Medicare Verification Processes
information Verification Medi-Cal Medicare
1 Medicare Confirm that the applicant, and all individuals and entities listed on the
eligibility application, are not excluded from the Medicare program by the federal
Department of Health and Human Services’ Office of Inspector General (OIG) X X
2 Corporate status 1. Review the Web site of the Secretary of State; and X X
2. Review the articles of incorporation included with the application X X
3 Fictitious business Review the Web site of the Medical Board X X
name
4 Business phone 1. Search phone directory Web sites for the phone number ownership and
number type; or X
2. Call the number listed on the application directly X X
3. Match the applicant’s telephone number with known, in-service telephone
numbers, using Qualifier.net to correlate applicant telephone numbers
with addresses X
5 Medical license 1. Confirm with the appropriate state agency that the license is current; or X X
2. Review the notarized or “certified true” copy of the license included with
the application X
3. Review the Qualifier.net Web site X
6 State-issued Review the copy of the applicant’s driver’s license or state-issued
identification identification card to ensure the name agrees with the one on the application X
7 Federal Employer 1. If a Federal Employer Identification Number is provided, confirm
Identification that the legal name on the application agrees with Internal Revenue
Number Service documentation X X
2. Review the Qualifier.net Web site to ensure that there is sufficient evidence
to link the Federal Employer Identification Number with the person named
on the application X
8 Social Security 1. Review the Provider Master File—the state’s listing of active Medi-Cal
Number* providers—to determine whether there are other enrolled providers
using the same Social Security Number, and if so, whether they are in
good standing X
2. If both a Social Security Number and a copy of the card are provided,
ensure that the name and number on the card agree with the application X
3. Review the Provider Enrollment, Chain and Ownership System to ensure the
Social Security Number is linked to the applicant and that the applicant is
not using more than one Social Security Number X
4. Review the Qualifier.net Web site to ensure that the applicant’s Social
Security Number has not previously been used X
9 Liability insurance Review the proof of professional liability and comprehensive liability insurance
to ensure that it was current at the time of application X
10 Clinical If a Clinical Laboratory Improvement Amendment (CLIA) certification number
Laboratory is provided, review the copy of the certificate included with the application to
Improvement ensure that it is current, legible, and the name on the CLIA certificate agrees
Amendment with the name on the application X X†
certification
number
California State Auditor Report 2006-110
information Verification Medi-Cal Medicare
11 State laboratory If a state laboratory license/registration number is provided, review the copy
license/ of the license/registration included with the application to ensure that it is
registration current and legible and that the name on the license/registration matches that
of applicant. If not, verify through OIG Web site and review the department’s
history with the applicant X X
12 Local business Review copy(ies) of the licenses and permits included with the application to
license numbers ensure that they are current and legible X X‡
and permits
13 National Provider Review notification from National Plan and Provider Enumeration System X
Identifier
14 Date of birth Review the Qualifier.net Web site X
15 Contact phone Call the number listed on the application directly X
number
16 Absence of Review the Qualifier.net Web site X
adverse legal
action
17 Reinstatement 1. Review proof of reinstatement X X
after adverse
2. Verify with the OIG and request applicant to submit written proof X
legal action
18 Practice location Review the Qualifier.net Web site to ensure that the location actually exists X
19 Owners, 1. Review the OIG Web site X
corporate
2. Review the department’s history of the applicant X
officers,
partners, or 3. Review the Provider Master File to determine whether any of the corporate
managers are in officers or owners have ever been enrolled and, if so, are in good standing
good standing with the program X
4. Perform a standard Web search on Google.com for information regarding
disciplinary actions, disclosure information, and historical items of
significance to provider enrollment X
5. Review the Qualifier.net Web site X
Sources: Department of Health Services’ streamlined and high-risk physician and allied provider application review checklists and
the Medicare Program Integrity Manual and physician and non-physician practitioner enrollment application.
Note: According to the Medicare Program Integrity Manual, all Medicare application data should be verified using Qualifier.net
unless otherwise stated. Further, if there is a discrepancy between the information furnished by an applicant and the information
on Qualifier.net, Medicare’s contractors should use alternative methods to confirm the data in question. However, any information
that is verified via supporting documentation, such as certifications and licenses, need not be verified through Qualifier.net. The
table lists some of the elements that Medicare’s contractors verify in addition to those verified by the Provider Enrollment Branch,
but not all of them, since it is not the focus of this analysis.
* Neither Medicare nor Medi-Cal require that an applicant provide support for a listed Social Security Number.
† Medicare’s verification of CLIA numbers with copies of CLIA certificates is implied by the Medicare application. Although this is
not precisely stated in the manual, this verification procedure may fall under the broad rule, discussed in the note above, that
any information that is verified by supporting documents need not be verified through Qualifier.net.
‡ Medicare requires only that applicants submit business licenses required by the applicant’s state to operate as a health care
facility or practice.
California State Auditor Report 2006-110
Blank page inserted for reproduction purposes only.
6 California State Auditor Report 2006-110
Agency’s comments provided as text only.
Health and Human Services Agency
California Department of Health Services
1501 Capitol Avenue, Suite 6001
P.O. Box 997413
Sacramento, CA 95899-7413
April 2, 2007
Elaine M. Howle*
State Auditor
Bureau of State Audits
555 Capitol Mall, Suite 300
Sacramento, CA 95814
Dear Ms. Howle:
The California Department of Health Services (CDHS) has prepared its response to the Bureau of
State Audits (BSA) draft report entitled “Department of Health Services: It Needs To Improve Its
Application and Referral Processes When Enrolling Medi-Cal Providers.” The CDHS is appreciative
of the work performed by the BSA and values any outside entities assessment of our programs,
along with recommendations made as a result. While the CDHS is proud of the significant
improvements it has made with regards to the enrollment of providers into the Medi-Cal program,
the report highlights areas which can still be improved upon and provides valuable feedback to
that effect. The CDHS intends to incorporate recommendations accordingly. Thank you for the
opportunity to respond to the draft report.
Please contact Stan Rosenstein, Deputy Director, Medical Care Services, at (916) 440-7800 if you
have any questions.
Sincerely,
(Signed by: Tom McCaffrey for Sandra Shewry)
SANDRA SHEWRY
Director
Attachment
* California State Auditor’s comments begin on page 65.
California State Auditor Report 2006-110
California Department of Health Services’ Response to the
Bureau of State Audits’ Draft Report Entitled
“Department of Health Services:
It Needs to Improve Its Application and Referral Processes When Enrolling Medi-Cal Providers”
Recommendation:
To ensure that it does not prevent or delay some eligible providers from delivering services to
Medi-Cal beneficiaries, the branch should ensure that it promptly notifies applicants that it has
automatically enrolled them as provisional Medi-Cal providers when the branch has not processed
the applications within the required time periods.
Response:
The California Department of Health Services (CDHS or Department) agrees that the Department
has not immediately notified providers of their enrollment status when applications have not
been processed within the required time periods. While the Department takes various measures
to ensure that all applications are processed within the statutorily mandated timeframes, and
continues to enhance these efforts, it recognizes that there have been a small number of instances
where this was not the case. In these instances, providers received notification of enrollment
status within two weeks of enrollment, and were allowed to submit claims for service retroactive
to the date of application. The Department appreciates the concerns and recommendation
regarding notification, and will implement a process for notifying these providers immediately
upon enrollment.
Recommendation:
The branch should modify the PETS data to track the length of time applications it recommends for
denial remain in the policy section for review, to ensure that it does not automatically enroll or pay
the claims of ineligible providers when the review does not occur in a timely manner.
Response:
The CDHS agrees that the tracking mechanism, which is available in the Provider Enrollment
Tracking System (PETS), must be better utilized by the Policy Unit to track the length of time
applications are in their possession for review and denial. A report will be implemented to improve
the tracking of applications that have gone to the Policy Unit for denial, ensuring that PEB Policy
Unit staff do not allow applications identified for denial, to default.
Recommendation:
Branch management should include in their secondary reviews of applications periodic reviews
to ensure that staff are entering the correct dates the branch received, processed, or returned the
application accurately and consistently into the PETS.
Response:
The CDHS agrees that Branch management should conduct periodic reviews to ensure accuracy in
entering the correct dates the branch received, processed, or returned the application in PETS.
1
California State Auditor Report 2006-110
California Department of Health Services’ Response to the
Bureau of State Audits’ Draft Report Entitled
“Department of Health Services:
It Needs to Improve Its Application and Referral Processes When Enrolling Medi-Cal Providers”
The enrollment process currently includes a peer review process on all cases being approved
1
for enrollment. In addition, peer reviewers and managers also review all deficiency and denial
letters generated by new staff prior to release. After an application is approved, the information
to be entered into the provider file is a three-step process to ensure accuracy and confidentiality.
While CDHS management currently reviews new employee work and randomly samples the
work of others, the branch will re-evaluate the frequency and depth of these reviews and
adjust accordingly.
Recommendation:
To protect the integrity of the PETS data, the branch should remove all staff training and branch
testing data from the PETS and include it in an environment that simulates the PETS, thus
protecting the integrity of the production data.
Response:
The CDHS agrees with the recommendation that it must protect the integrity of the production
data. The PETS system was originally developed to track a small number of applications being
submitted as part of the initial re-enrollment effort. However, the number of records and purpose
of the database significantly increased, resulting in limitations on system modifications. Removing
current data from PETS test files can be completed by a PETS Administrator and the test cases
can be deleted within a reasonable period of time. PEB will explore various alternatives for
addressing the concerns, including, but not limited to, modification of testing procedures, and
ensuring that future automation projects include a unique test and training environment.
Recommendation:
To ensure that the branch does not unnecessarily increase its workload or prolong the enrollment
process for eligible applicants, it should increase its efforts to notify applicants that they must
use the current and appropriate application forms to avoid being denied enrollment into the
Medi-Cal program.
Response:
CDHS appreciates the recommendation to enhance methods of informing providers regarding the
need to submit the most current and appropriate applications for enrollment. The analysis correctly
identified that the frequently asked questions on the Medi-Cal website does not remind applicants
that the use of outdated forms is one of the common reasons for the denial of applications. PEB
is revising the frequently asked questions to include this information. These recommendations will
complement the work done to date.
CDHS has taken multiple actions to reduce workload associated with the submission of incorrect
applications, and the resulting delay in enrollment of providers. Among these actions, the CDHS
ensures that the most current and up to date applications and forms are available on the Medi-Cal
2
California State Auditor Report 2006-110
California Department of Health Services’ Response to the
Bureau of State Audits’ Draft Report Entitled
“Department of Health Services:
It Needs to Improve Its Application and Referral Processes When Enrolling Medi-Cal Providers”
website at www.Medi-Cal.ca.gov, as soon as the forms are made effective. In addition, the Provider
Bulletin also notifies providers that a forms change is imminent and that only the newest versions
of the application should be submitted. The branch has always allowed a grace period for the
providers to obtain or download the newest versions. CDHS has accepted the older versions for
a designated time period before denying outdated forms. The Department’s fiscal intermediary
Electronic Data Systems (EDS) is available to answer questions on forms and provide applicants
with the most updated applications. Providers and applicants wishing to obtain the correct forms
can also access the newest forms by going online to obtain the most current and correct forms.
The Medi-Cal website also includes a Frequently Asked Questions, Enrolling as a New Medi-Cal
Provider and Application Tips information links to assist providers in choosing and submitting the
correct applications.
Recommendation:
The Department should seek legislation to revise state law to extend the 35-day time period
applicants have to remedy deficiencies in their applications to 60 days.
Response:
The CDHS agrees with the recommendation to extend the 35-day time period applicants have to
remedy deficiencies in their applications to 60 days. While most applicants do not have a problem
meeting the 35-day requirement as demonstrated by the fact that in federal fiscal year 2005–06
more than 83 percent of resubmitted applications were returned within the 35 days, the Department
recognizes that extending the period to remediate deficiencies, will likely result in more expeditious
enrollment of some eligible providers. The Department would support legislation which expands this
remedy period to 60 days.
Recommendation:
The department should seek legislation to revise state law to eliminate preferred provider status.
However, to the extent that it chooses to keep this status and to increase the number of applicants
that could benefit from the shorter processing period that preferred provider status offers, the
department should increase its efforts to notify applicants of the reasons it denies applications
during the prescreening for preferred provider status.
Response:
The CDHS acknowledges that the number of physicians applying for, and benefiting from, preferred
provider status is small, and has decreased due to the introduction of the rendering provider
regulations and the significant improvement in application processing times. While the majority of
physicians have elected not to enroll under this status, the California Medical Association’s (CMA)
intent for introducing “preferred provider status” under SB 857 remains valid. SB 857 does not
adversely impact the Branch’s ability to process applications in a timely manner. Consequently, the
Department recommends allowing physicians to weigh the cost/benefit of enrolling as preferred
3
60 California State Auditor Report 2006-110
California Department of Health Services’ Response to the
Bureau of State Audits’ Draft Report Entitled
“Department of Health Services:
It Needs to Improve Its Application and Referral Processes When Enrolling Medi-Cal Providers”
providers. Should the Department identify a need to eliminate or revise preferred provider status,
it will do so in cooperation with the CMA. In the interim, the Department will explore ways of
increasing physician awareness of preferred provider status, and the reasons applicants under this
status are not successful in meeting enrollment requirements.
Recommendation:
The branch, with direction from the department, should align the reasons available in the PETS, for
which it may refer an application, with its fraud indicators and high-risk checklists to better track the
appropriateness of its high-risk checklists and update the fraud indicators as trends in fraud change
over time.
Response:
The CDHS concurs that it should align the referral reasons available in the PETS with its fraud
indicators and high-risk checklists to better track the appropriateness of its high-risk checklists
and update the fraud indicators as trends in fraud change. While referral reasons are limited in
the PETS, the Medical Review Branch (MRB) and Provider Enrollment Branch (PEB) are working
collaboratively to evaluate the fraud indicator checklists on a quarterly basis using findings from
the on-going risk assessment analyses and the annual Medi-Cal Payment Error Study. The PEB is
working to modify the reasons table in PETS to accurately reflect the referral indicators.
In addition, the Provider Enrollment Automation Project will improve PEB’s ability to collect data
regarding referral reasons. Currently, PETS only allows for the selection of one reason for a referral
when in most instances there are multiple reasons that staff refer an application. The new system
will allow staff to enter multiple referral reasons, resulting in more comprehensive data being
available for analysis and trending.
Recommendation:
To ensure that it is referring those applicants at greatest risk of committing fraud and not preventing
eligible Medi-Cal providers from providing services to beneficiaries, the branch and the Medical
Review Branch, with direction from the department, should reevaluate the appropriateness of the
branch’s high-risk fraud indicators periodically by consistently communicating and collaborating with
one another.
Response:
The Department concurs with the recommendation to reevaluate the appropriateness of the
branch’s high-risk fraud indicators periodically. PEB and MRB continue to communicate and
collaborate together after the annual error rate study is completed to reevaluate high-risk fraud
indicators. This allows both branches to have the advantage of the error rate study findings as we
discuss issues and propose alternative procedures for the future.
4
California State Auditor Report 2006-110 61
California Department of Health Services’ Response to the
Bureau of State Audits’ Draft Report Entitled
“Department of Health Services:
It Needs to Improve Its Application and Referral Processes When Enrolling Medi-Cal Providers”
Additionally, both branches are reconvening the previously established monthly meetings between
branch managers in order to maintain open communications and initiate positive responses to
recommendations. This meeting will include a quarterly evaluation of PEB review check sheets with
findings from MRB field staff. These meetings will have a formal agenda and the minutes will be
published internally.
Recommendation:
The branch and the Medical Review Branch, with direction from the department, should place
increased emphasis on processing those applications referred for further review within a
reasonable time period, to ensure that some eligible Medi-Cal providers are not unreasonably
delayed from providing services to beneficiaries.
Response:
The Department concurs with the recommendation to have PEB and MRB process the referrals
within a reasonable time period. Over the last three years, the Department has significantly
improved the average processing time for cases that have been referred for further background
review. We are committed to reviewing existing practices and streamlining efforts where
appropriate. In a number of cases, however, extenuating circumstances prevent an expeditious
2
review. Factors impacting this period include protracted litigation with providers under review,
investigations by licensing authorities, and ongoing criminal investigation by the California
Department of Justice, and or, the Federal Bureau of Investigation. Criminal investigations can be
especially time consuming, often taking a year or more. To set a time limit on these cases would
compromise the integrity of the investigation.
It is important to note that many of the providers referred for further background review already
2
have a provider number, thus the delay in completing the review does not adversely impact the
provider’s ability to render services or submit claims for those services.
Recommendation:
The branch should monitor the implementation of Medicare’s revalidation process in which it
verifies the enrollment information for all of its providers to identify opportunities for streamlining
its application and verification procedures, and should make modifications, as appropriate for
Medicare providers seeking enrollment in the Medi-Cal program.
Response:
The CDHS agrees that it should monitor the implementation of Medicare’s revalidation process and
identify opportunities for streamlining its application and verification procedures as appropriate, for
Medicare providers seeking enrollment in Medi-Cal. The department is committed to the efficient
and effective processing of provider enrollment applications which ensure timely enrollment of
qualified providers, and consistently seeks ways of improving enrollment practices. The
5
62 California State Auditor Report 2006-110
California Department of Health Services’ Response to the
Bureau of State Audits’ Draft Report Entitled
“Department of Health Services:
It Needs to Improve Its Application and Referral Processes When Enrolling Medi-Cal Providers”
department, through communication with CMS has learned of Medicare’s proposed regulations
which attempt to mirror a great deal of the good work which has already been done in California’s
Medicaid program. Along with these regulatory changes, the department will monitor the progress
of Medicare’s revalidation process and evaluate the benefit of incorporating Medicare’s review into
the enrollment process.
Recommendation:
The branch should continue its plans to reenroll all of its Medi-Cal providers and add any resources
freed by its streamlining of its enrollment process.
Response:
The CDHS concurs with this recommendation. CDHS commenced re-enrollment efforts in
1999 with the re-enrollment of Durable Medical Equipment (DME) providers. Since then, CDHS has
initiated the re-enrollment of physicians, physician groups, optometrists, pharmacists, and
providers originally enrolled prior to 1998, who may lack a current disclosure statement. Additional
resources will be directed to re-enrollment as additional opportunities arise for streamlining
enrollment processes.
High-risk provider types will continue to be identified through the coordinated efforts of PEB and
MRB, using an on-going risk assessment analysis and the annual Medi-Cal Payment Error
Study (MPES), allowing PEB to prioritize the reenrollment of these providers. This reenrollment
plan, which is included in the CDHS’ Medi-Cal Fraud Control Strategic Plan, consists of ongoing
reenrollment efforts.
6
California State Auditor Report 2006-110 6
Blank page inserted for reproduction purposes only.
6 California State Auditor Report 2006-110
CoMMents
California State Auditor’s Comments
on the Response From the
Department of Health Services
To provide clarity and perspective, we are commenting on
the response to our audit from the Department of Health
Services (department). The numbers correspond with the
numbers we have placed in the department’s response.
1
As we report on page 26, the chief of the Provider Enrollment
Branch (branch) explained that a secondary review is not
always done when branch staff correspond with an applicant,
such as sending a deficiency letter, or when branch staff enter
application information in the Provider Enrollment Tracking
System (PETS), including the date the application was received.
In fact, although the chief of the branch explained a secondary
review is most likely to take place when new branch staff process
an application, these secondary reviews of applications do
not include periodic reviews to ensure that staff are entering
the dates that the branch received, processed, or returned the
application accurately and consistently into PETS. Because
incorrect data in PETS hinders the branch’s ability to track the
status of applications accurately, it is important for the branch
to implement a method of verifying the accuracy of the data.
2
We recognize that extenuating circumstances, including
protracted litigation or criminal investigations, may prevent the
department from processing certain referred applications within
a reasonable time period. However, our recommendation focuses
on those applications the branch refers to other units within
the department that are under its control. Thus, the department
has the ability to place increased emphasis on processing these
applications within a reasonable time period. Additionally,
our review of referred applications included those submitted
by providers that may already have a provider number, but
are requesting a change in address, an additional location, or
a change in ownership. However, some of these providers may
not render services or submit claims for these services at the
new address, additional location, or under the new ownership,
until the department has approved their application packages.
Thus, to the extent the department delays completing its
California State Auditor Report 2006-110 6
secondary review and approval of these types of applications,
it may delay some eligible providers from providing services to
Medi-Cal beneficiaries.
66 California State Auditor Report 2006-110
cc: Members of the Legislature
Office of the Lieutenant Governor
Milton Marks Commission on California State
Government Organization and Economy
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press
California State Auditor Report 2006-110 6