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California DHCS Issues RFP for Medi-Cal Managed Care Plans, But Some Deals Have Already Been Made

DHCS inked a new deal with Kaiser Permanente that have other stakeholders upset


On February 9, 2022, the California Department of Health Care Services (DHCS) released a Request for Proposal, for Medi-Cal Managed Care Plans (MCP) procurement. The purpose of the RFP is to obtain proposals from firms interested in providing managed care services to those enrolled in Medi-Cal. 

The RFP places a new emphasis on quality, equity, and access to care, as these are all pillars of CalAIM. MCPs will need to demonstrate their ability to provide high-quality and comprehensive care, reduce health disparities, and improve health outcomes. 

Managed Care Plan proposals are due by April 11, 2022. Contracts are expected to be awarded sometime in August 2022 and will be slated to go into effect on January 1, 2024.

DCHS Inked Deal with Kaiser Permanente

While the official RFP was released on February 9th and contracts are not slated to be awarded until August 2022, on February 4th, DHCS announced plans to enter into a direct contract with Kaiser Permanente. The deal would allow them to expand their Medi-Cal managed care plan to new geographic areas in the state. Kaiser Permanente currently has 9 million beneficiaries in California, though only 900,000 of them are Medi-Cal members.

The new deal will go into effect in 2024, as long as it receives approval from the state legislature. It will run for 5 years and make Kaiser Permanente the only insurer with a statewide Medi-Cal contract.  

The arrangement would require Kaiser to implement the following, among other initiatives: 

  • California Advancing and Innovating Medi-Cal (CalAIM) Medicaid waiver Enhanced Care Management (ECM) and Community Supports consistent with other Medi-Cal MCPs
  • Not limit their CalAIM ECM and Community Supports to only Kaiser Permanente enrollees
  • Implement at least the same number of CalAIM Community Supports as other Medi-Cal MCPs in the geographic area

In announcing the contract, DHCS emphasized that it would preserve member continuity. maintain quality outcomes, and reduce disparities. Kaiser is unable to participate in the RFP process because it is unable to meet requirements due to geographic constraints and physical capacity. As a result, if the contract was not granted, the state could lose Kaiser as an MCP. That would mean Kaiser members in the five GMC counties would need to change health plans. In addition, by losing Kaiser, the Medi-Cal program would lose its highest quality plan, the Kaiser integrated model, and Kaiser’s expertise.

Kaiser already provides care to approximately 9 million beneficiaries in the state. By inking the deal, DHCS was striving to keep Kaiser as an MCP in the state and allow them to continue providing quality care to a vast number of Californians. As one of the top-scoring MCPs in the state in regards to quality of care, California was not willing to lose them and their expertise. 

Kaiser Permanente Deal Angers Other MCPs

While California DHCS tried to stress the importance of the deal, it was not met with cheers from other stakeholders. The deal, which was ironed out between Kaiser Permanente and Governor Newsom’s senior officials behind closed doors, has angered executives of other managed care plans that also participate in Medi-Cal. 

Some claim that this allows the MCP to solidify its position in the state before other commercial Medi-Cal plans can because other firms still need to participate in the bidding process. Most have spent months and considerable resources developing their bidding strategies, while Kaiser was able to skip the process. It led to questions of credibility and transparency. 

“All of us are doing our best to implement the most transformational Medi-Cal initiative in state history, and to put all this together without a public process is very disconcerting,” said Jarrod McNaughton, CEO of the Inland Empire Health Plan.

Kaiser Permanente has pushed back, stating that they operate as both a healthcare provider and insurer, thus it should be treated differently than other commercial health plans that will still need to go through the bidding process.

“We are not seeking to turn a profit off Medi-Cal enrollment,” Bechara Choucair, M.D., Kaiser Permanente’s chief health officer stated in a written response. “We participate in Medi-Cal despite incurring losses every year.”

Could Deal Impact CalAIM Transformation?

Still, some question whether or not the deal could muddle the CalAIM initiative. Under the newly brokered deal, Kaiser Permanente will be required to provide the same Community Supports as other MCPs, but many executives believe that they will not have to enroll a large number of patients who need those services, because of the way they are able to handpick enrollees. 

The public RFP bidding process would have required detailed conversations about CalAIM and the ability to provide social supports. Kaiser does not have the best track record when it comes to providing mental health services. In fact, the American Psychological Association recently released a scathing letter in which they stated, “We have never seen such an egregious case of delayed access” to care. 

These are concerning statements and it will be important for the California DHCS to hold Kaiser Permanente to the same standard as other MCPs when it comes to providing Community Supports under CalAIM.

Advocates Perspective

When striving for transformational change in the quality of healthcare and how it is delivered, transparency is essential. Many MCP stakeholders are upset with the Kaiser Permanente deal as they are still required to go through the RFP bidding process. While some believe it undermines the goals of CalAIM, others argue that Kaiser provides quality services, allows satisfied members to stay enrolled in Kaiser plans, and the new deal will require them to take on more low-income enrollees. As advocates for the consumer, it is essential that Kaiser enrollees are able to switch plans should they choose to do so. In addition, all MCPs must be held to the same standards when it comes to delivering quality care. CalAIM will give DHCS and counties more oversight over MCPs, regardless of who they are. We will continue to keep a close eye on the developments in California as CalAIM progresses.


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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

mandy sahhar

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.