Whistleblower says Medicaid managed-care firm improperly denied care to thousands of Californians

In early October, an executive at one of the nation’s largest physician-practice management firms handed her bosses the equivalent of a live grenade — a 20-page report that blew up the company and shook the world of managed care for poor patients across California.

For years, she wrote, SynerMed, a behind-the-scenes administrator of medical groups and managed-care contracts based in Monterey Park, had improperly denied care to thousands of patients — most of them on Medicaid — and falsified documents to hide it.

The violations were “widespread, systemic in nature,” according to the confidential Oct. 5 report by the company’s senior director of compliance, Christine Babu. And they posed a “serious threat to members’ health and safety,” according to the report, which was obtained by Kaiser Health News.

Days later, someone sent the report — labeled as a “draft” — anonymously to California health officials. Within weeks, state regulators had launched an investigation, major health insurers swept in for surprise audits, the company’s chief executive announced the firm would close and doctors’ practices up and down the state braced for a tumultuous transition to new management.

In her report, Babu said she felt threatened and pressured to drop the matter during conversations with her boss, SynerMed’s general counsel and chief compliance officer. That person is identified elsewhere in the report as Renee Rodriguez.

During a meeting in her office on Oct. 3, Babu said, “[I]t seemed as if [Rodriguez] was trying to convince me to drop the case.”

The following day, Babu wrote, “[T]here is a likelihood that they [leadership of SynerMed] would terminate me .… I indicated that I would not stop fighting for what is just, and that I was prepared to involve the authorities as I now felt uneasy about everything.”

Babu couldn’t be reached for comment. Rodriguez didn’t return calls.

In a Nov. 6 email to employees, SynerMed’s chief executive, James Mason, said the company was shutting down. In a statement Wednesday to Kaiser Health News, apparently in reference to Babu, he said: “It is unfortunate that one of our employees jumped the gun and disclosed confidential information regarding our clients and members.”

Mason said the company suspended “this individual immediately so we could investigate exactly what information was transmitted,” including whether it included confidential patient information. That person and others were later laid off, he said, as health plan auditors stepped in and the company’s operations wound down.

He said the company took the allegations seriously and quickly investigated them.

Health plans that contract with SynerMed’s medical groups condemned the alleged wrongdoing and said they were committed to helping any patients who may have been affected.

Anthem Blue Cross, the nation’s second-largest health insurer, said some physician groups will be terminating their contracts with SynerMed due to the allegations. The company said it’s working closely with state officials and physicians “to ensure a smooth transition for all of our members affected by these changes.”

John Baackes, chief executive of L.A. Care Health Plan, which had contracts with medical groups managed by SynerMed, said: “There was a pattern of deception this organization was willing to engage in that raises integrity questions about the entire operation. For them it was better to cheat than follow the rules. We take it extremely seriously, particularly when lives are at stake in terms of getting timely access to care.”

Terhune is a senior correspondent for Kaiser Health News, an editorially independent publication of the Kaiser Family Foundation.

cterhune@kff.org

Twitter: @chadterhune

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