State auditor flags Medi-Cal provider payments as 'high risk,' saying 26,000 top-risk providers were never investigated; health department disputes it

The auditor found providers who billed after becoming ineligible and a one-van transportation company that claimed 35 riders in a day. The department says its risk scores are "signals," not proof of fraud.

By Alberto Zamudio | The Southbound 105 | Oct. 17, 2026

California's state auditor says the agency that runs Medi-Cal is not doing enough to stop improper payments to doctors, clinics, hospices and other providers, in a report released Thursday, Oct. 15. The Department of Health Care Services (DHCS) strongly disagrees, CalMatters reported.

Medi-Cal, the state's Medicaid program, covers more than 14 million Californians, more than one-third of the state's population, according to the report. The program has about $220 billion allocated in the 2026-27 state budget.

What the auditor found

State Auditor Grant Parks updated the state's "high-risk" list to add DHCS's oversight of provider payments as a new reason the department is on it. DHCS has been on the list since 2007 and was kept there in December 2025 over problems with Medi-Cal eligibility decisions, the report says.

Key findings from the report:

• 26,000 high-risk providers not reviewed. One DHCS risk tool placed about 28,000 providers in the top 10% of risk scores for inappropriate billing. As of March 2026, the department had not researched or investigated more than 26,000 of them. Those providers accounted for at least $12 billion in Medi-Cal services in fiscal 2024-25.
• Ineligible providers still billing. Two providers billed nearly $1.6 million in 2024-25 after becoming ineligible years earlier, including a hospice whose license the state revoked in late 2020.
• Mileage overcharges. More than 130 transportation providers were paid nearly $31 million more than allowed by billing a nonemergency ambulance rate of $3.55 a mile for rides in taxis and wheelchair vans, which pay $1.30 a mile.
• One van, 35 riders. One transportation provider with a single registered vehicle claimed trips for 35 people in one day, nine of them over 340 miles each. It claimed more than $11 million in 2024-25.

The auditor said not all of the $12 billion is likely to be fraud, but "even a small percentage represents a significant amount of money." Even 1% would be $120 million.

Fewer investigators per dollar

The report says DHCS had 137 investigative staff in 2016 and 141 in 2026, while the Medi-Cal budget more than doubled. Investigators per billion dollars of spending fell 57%, from 1.69 to 0.73. DHCS gets nearly 2,000 fraud, waste and abuse referrals a month and investigates fewer than 15% of them, the auditor found.

In one hospice case, DHCS closed a referral it received from a health plan in 2023, even though the plan found improper payments. The provider then billed more than $5.5 million in 2024-25 before the department referred it to the state Department of Justice in April 2026. As of July, no charges had been filed, the report says.

The department pushes back

In a written response included in the report, DHCS said the auditor's work "omits critical information and context, resulting in an incomplete analysis" and highlights "isolated anecdotes while ignoring system-wide data."

The department said its risk tool is meant to "cast a wide net," and that a high score is a "signal," not a finding of fraud. It said more than 20% of its staff work on program integrity, and that it recovers $8.60 for every $1 its audits and investigations division spends. DHCS also pointed to a hospice fraud case it calls Operation Skip Trace, which it said brought felony charges against 21 suspects, arrests after raids in Southern California and $60 million in seized funds.

DHCS also argued that because most Medi-Cal care runs through managed care plans paid a fixed monthly rate, provider billing totals do not equal actual losses to taxpayers.

What happens next

This report is not a full audit and makes no specific recommendations, the auditor said. It gives the auditor's office the authority to launch deeper audits of Medi-Cal provider payments when resources allow. DHCS told the auditor it could pursue more credible leads if lawmakers gave it more resources.

Want more local news? Read more at The Southbound 105.

Cover photo: Andre m, CC BY-SA 3.0, via Wikimedia Commons.

Sources

• California State Auditor, "State High-Risk Program: Assessment of Department of Health Care Services Oversight of Medi-Cal Provider Payments," Report 2025-605 (Oct. 15, 2026): https://www.auditor.ca.gov/reports/2025-605/
• CalMatters, "California falls short on Medi-Cal fraud, state report says" (Oct. 16, 2026): https://calmatters.org/health/2026/10/california-medi-cal-fraud-state-report/