Report 2022-112 Recommendation 1 Responses
Report 2022-112: CalOptima Health: It Has Accumulated Excessive Surplus Funds and Made Questionable Hiring Decisions (Release Date: May 2023)
Recommendation #1 To: CalOptima Health
To ensure that it uses its existing surplus funds for the benefit of its members and to comply with county ordinance, by June 2024 CalOptima should create and implement a detailed plan to spend its surplus funds for expanding access, improving benefits, or augmenting provider reimbursement, or for a combination of these purposes. This plan should be reviewed by its board and approved in a public board meeting.
60-Day Agency Response
CalOptima Health senior leadership will continue to report to the Finance and Audit Committee and the Board of Directors on the status of reserves and expenditures, including a written report in the publicly available Board materials. The Board will review levels of total assets and Board-designated reserve funds on an annual basis, at minimum, during the development of the strategic plan and the annual operating budget.
During this review, the Board will assess resources to be used for the purposes of expanding access, improving benefits, and/or augmenting provider reimbursement. The Board will determine when a spending plan(s) for various initiatives are appropriate.
CalOptima Health has been drastically accelerating our efforts to improve access and quality of health care for the most vulnerable residents in Orange County. These efforts continued with the Board's approval to allocate $182 million in reserves at the June 1, 2023, CalOptima Health Board of Directors Meeting. The Board of Directors has and will continue to take separate actions to allocate available funds, and to do so wisely in a manner that best serves our members.
As communicated previously, CalOptima Health must ensure tactical use of government funds to support our members and providers. It would not be fiscally prudent to spend all unallocated funds above the minimum reserve requirement within a defined period.
- Estimated Completion Date: 06/2024
- Response Date: June 2023
California State Auditor's Assessment of 60-Day Status: No Action Taken
The practices that CalOptima states it will continue to engage in resulted in it accumulating hundreds of millions of dollars of surplus funds. We stand by our recommendation that CalOptima should comply with the county ordinance to spend funds in excess of its established reserve for the benefit of its members, and believe that it would be prudent to create and implement a plan to spend those surplus funds. CalOptima states that it believes that it is not fiscally prudent to spend the unallocated funds in excess of its established reserve requirement. If this is true, we encourage CalOptima to revise the reserve requirement to a level that it considers prudent. We will assess CalOptima's progress toward implementing this recommendation when it provides its next update.
Agency responses received are posted verbatim.