State High-Risk Program Assessment of Department of Health Care Services Oversight of Medi-Cal Provider Payments

Assess Health Care Services’ oversight of Medi-Cal provider payments and determine whether the agency is at substantial risk of making inappropriate payments to Medi-Cal providers.

Justify the designation of Health Care Services on the California state high-risk list and determine if the high-risk designation is warranted.

Identify weaknesses, risk indicators, and opportunities for improvement in provider payment oversight, including the effectiveness of risk assessment tools and follow-up actions on referrals.

Provide context and evidence to inform future, in-depth audits of Medi-Cal payment practices and potential corrective actions that may reduce the risk of fraud, waste, and abuse.

Health Care Services has a history of weaknesses in overseeing Medi-Cal providers, including prior audit findings related to payments to providers with indicators of fraudulent activity.

One risk assessment tool identified approximately 28,000 providers as being in the top 10 percent of risk scores for inappropriate billing, but Health Care Services has not researched or investigated 26,000 of these providers—who accounted for at least $12 billion in Medi-Cal services in fiscal year 2024–25.

Managed care plans’ investigations and Health Care Services’ follow-up efforts have not always been sufficient to stop providers from inappropriate billing for Medi-Cal services; Health Care Services has been slow to or failed to follow up on certain providers when there are indications of potential wrongdoing.

For example, Health Care Services closed an investigative referral it received from a managed care plan in 2023, even though the plan concluded that some payments were inappropriate and that the provider was nonresponsive; the provider went on to bill more than $5.5 million in Medi-Cal services in fiscal year 2024–25 before Health Care Services eventually referred the provider to the California Department of Justice (DOJ) for possible criminal investigation and prosecution in April 2026; as of July 2026, DOJ had not filed charges for this provider.

Two providers collectively billed for nearly $1.6 million in Medi-Cal services in fiscal year 2024–25, despite having become ineligible to participate in the Medi-Cal program before or during fiscal year 2021–22.

Transportation providers overcharged almost $31 million in Medi-Cal services in fiscal year 2024–25 by charging mileage at a rate intended for nonemergency ambulance trips, even though the claims were for services involving other vehicle types, such as taxicabs and wheelchair vans.

Provider I’s hospice license was revoked by Public Health in late 2020, but Health Care Services learned of the revocation nearly five years later while investigating Provider I in fiscal year 2025–26, and Provider I billed almost $1.3 million in Medi-Cal services for fiscal year 2024–25 despite ineligibility.

Two examples of ineligible providers participating in Medi-Cal; e.g., cases where the Department learned of revocations/ suspensions after payments had occurred and the department took corrective actions, with ongoing concerns about automatic notification of revocations.

Health Care Services has fewer investigative staff per billion dollars spent on Medi-Cal over time, with staffing per $1B dropping 57 percent from 2016 to 2026, while the Medi-Cal budget more than doubled.

Health Care Services’ use of risk assessment tools as signals rather than determinations has led to millions in potential mispayments remaining uninvestigated.