State auditor finds Medi-Cal never followed up on 26,000 providers its own software ranked as highest risk

California's state auditor says the agency that runs Medi-Cal is at substantial risk of paying providers money they should not get, and has added that finding to the reasons the Department of Health Care Services sits on the state's high-risk list.

The assessment, released Thursday by State Auditor Grant Parks, is not a full audit and makes no recommendations. Instead, it lays out why his office plans to spend resources on deeper audits of how Medi-Cal pays doctors, clinics and other providers. The department has been on the high-risk list since 2007 and was kept there in December 2025 over problems with eligibility decisions.

The size of the program

Medi-Cal covered more than 14 million Californians as of July 2025, more than a third of the state, and the 2026-27 state budget sets aside about $220 billion for it. The report says spending has more than doubled over the last decade. About 95% of members get care through managed care plans, which the state pays a fixed monthly amount per person.

Flagged, then left alone

The department built software that scores providers on billing patterns that can point to fraud, waste or abuse. The auditor looked at the roughly 28,000 providers in the top 10% of those scores for fiscal 2024-25 and found that, as of March 2026, the department had opened no referral or investigation on more than 26,000 of them.

Those providers accounted for at least $12 billion in Medi-Cal services that year.

The report does not claim all of that money was improper. It notes that 1% of the total would be $120 million, and that applying an 8% improper-payment estimate from a 2023 federal review would put the figure near $1 billion.

Among the flagged providers, the auditor highlighted five whose claims for a type of office visit that usually takes 20 to 29 minutes worked out, for four of them, to more than seven patients an hour on average, or under nine minutes each.

Referrals and staffing

The department logs close to 2,000 tips and referrals a month and investigates fewer than 15% of them, the report says. It has about 140 investigators, roughly the same as a decade ago (137 in 2016 and 141 in 2026), even as the Medi-Cal budget doubled.

Two cases are singled out. In one, the department closed a 2023 referral from a health plan that had found improper payments; that provider then billed more than $5.5 million in 2024-25 before being sent to the state Justice Department in April 2026, and no charges had been filed as of July.

In another, a provider referred to prosecutors in early 2026 for overprescribing was not suspended because of what the department called an internal oversight, and wrote about $200,000 more in Medi-Cal prescriptions over the next five months.

The department also told the auditor it has identified more than $2 billion in overpayments to providers from 2020-21 through 2024-25, about $300 million of which has not been recovered.

The department's response

A former acting branch chief told the auditor that a high score does not by itself mean fraud, since billing can jump for legitimate reasons such as a new program or a change in ownership, and the department described the scoring tool as a wide net.

In its formal response, quoted by CalMatters, the department disagreed with the findings, saying the report "omits critical information and context, resulting in an incomplete analysis" and focuses on "isolated anecdotes while ignoring system-wide data showing effective systems and controls."

Sources

auditor.ca.gov

pleasantonweekly.com