SACRAMENTO — October 21, 2026. California’s independent State Auditor has added a new warning about oversight of Medi-Cal payments to health-care providers. In an assessment published October 15, auditors said the Department of Health Care Services (DHCS) has not sufficiently examined thousands of providers that its own risk-scoring tools flagged for potentially inappropriate billing. DHCS strongly disputes the auditor’s broader conclusion and says the assessment overlooks significant anti-fraud work.
The most important distinction for patients and taxpayers: a computer-generated billing risk score is not a finding that a doctor, clinic or transportation company committed fraud. Nor does this report establish that $12 billion was stolen or incorrectly paid.
What the new state report found
According to California State Auditor Report 2025-605, one DHCS analysis identified approximately 28,000 providers in the highest 10 percent of risk scores for inappropriate billing. Auditors concluded that the department had not researched or investigated around 26,000 of those providers. Those providers accounted for at least $12 billion in Medi-Cal services during fiscal year 2024–25.
That $12 billion is the value of services associated with the providers in the group—not an official estimate of fraud losses or confirmed improper payments. An unusual volume of claims, changes in a clinic’s workload or a high number of patients can trigger a flag for legitimate as well as illegitimate reasons. The appropriate question is whether an agency has a defensible process for reviewing leads and following up when evidence warrants further action.
The auditor also described prior cases in which state reviews or managed-care plan investigations did not always lead to timely follow-up, including payments involving providers with disputed eligibility and questions about nonemergency medical transportation billing. Individual examples in the report use anonymized provider labels, rather than names.
Why payment oversight affects the cost of Medi-Cal
Medi-Cal is California’s Medicaid program, serving qualifying residents through different ways of paying for care. In a fee-for-service arrangement, the state pays approved claims directly through its processing system. With managed care, plans generally receive payments to cover members’ services and pay participating providers. The state auditor explains that inappropriate payments can matter in both systems: an improper fee-for-service claim can waste public money immediately, while undetected costs in managed care may also influence future payment-rate calculations.
Those financial risks are not the same as a finding that a given beneficiary was denied treatment or that a specific clinic provides poor care. The assessment examines program integrity and payment oversight; it is not a statewide clinical quality ranking.
DHCS rejects parts of the auditor’s assessment
The department’s detailed response, included in the official report PDF, disputes adding another high-risk basis to the department’s state oversight classification. DHCS argues that the auditor emphasized selected examples without adequately considering statewide controls, partnerships with federal authorities and its approach to prioritizing investigations.
DHCS reports that its program-integrity work saved more than $2 billion and collected more than $4 billion in overpayments and related recoveries over a five-year period. Those are department-reported figures presented in its response, not independent verification of the entire program’s effectiveness. The agency also says additional resources would help it address more credible investigative leads.
The State Auditor did not accept the department’s rebuttal and maintained its high-risk assessment. The dispute is about the adequacy of a large public program’s safeguards—not a determination of guilt for every flagged provider.
What the audit does—and does not—require
Report 2025-605 is an assessment explaining why payment oversight should be treated as high risk, not the result of a completed audit under the State High-Risk Audit Program. It therefore does not make a new set of specific corrective-action recommendations. Its findings could allow the State Auditor to launch a more detailed audit in the future, subject to resources and priorities.
There is no basis in this assessment to conclude that Medi-Cal enrollment has been canceled, that beneficiaries must change doctors, or that the state has declared all providers in the high-risk sample fraudulent. Readers should not interrupt necessary medical care because of a headline about suspected billing patterns.
What Medi-Cal members and California taxpayers should watch
California58 recommends following four accountability questions as the state responds:
- Verification: Will DHCS explain how it distinguishes ordinary high-volume providers from claims warranting investigation and how it records case outcomes?
- Follow-up: Will the agency reduce the backlog of high-risk referrals and publish comparable measures of leads investigated, closed or referred for enforcement?
- Program safeguards: Will regulators strengthen screening of ineligible providers and clarify billing rules for nonemergency ground transportation?
- Access to care: Will new controls protect patients from unnecessary service interruptions or wrongful suspicion, especially in rural counties where provider options are already limited?
If a person notices a service billed in their name that they believe they never received, they should first verify the record with the plan or provider and use an official DHCS or plan member-support channel to ask about a suspected billing error. A discrepancy should be investigated, not publicly treated as proof of intentional fraud.
For separate questions about eligibility and available public programs, California58 maintains its California Benefits Checker. That resource is not an investigative finding about the providers discussed in this report.
The accountability test ahead
The auditor’s figures identify a large gap between risk detection and documented investigative follow-up. DHCS says its existing controls and recoveries provide essential missing context. Both positions are publicly available in the same official record. The test for the state now is whether it can show which billing anomalies lead to verified action, how much money is legitimately recovered and whether safeguards protect both public funds and patients.
Primary source: California State Auditor, Report 2025-605, October 15, 2026, including the full response from the Department of Health Care Services. California58 has not identified any unnamed provider in the audit and does not allege that the entire amount of services flagged represents fraudulent payments.
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