MedPartners/Mullikin can grab more capitated revenues in California after it received a license that allows it to accept full risk.
The physician management company last week said it became the first provider in the state to receive a license under the Knox-Keene Health Care Service Plan Act of 1975, which regulates HMOs. Other providers are expected to follow suit.
To obtain the license, MedPartners/Mullikin met the same criteria as HMOs and PPOs, such as financial viability. However, it is restricted from selling services directly to employers or individuals.
In practical terms, the license allows a subsidiary called Pioneer Provider Network to accept global capitation-a single payment for physician and hospital services-even if it subcontracts with other providers to deliver some of those services.
That means the company can sign global capitation agreements with HMOs in markets where it doesn't own a hospital.
MedPartners/Mullikin has been doing global capitation using 80 to 90 subcontracted hospitals in California, said Mark Wagar, chief operating officer for the company's West Coast division. But last year the state Department of Corporations asked the company to apply for a license under Knox-Keene if it wished to continue those arrangements.
MedPartners/Mullikin covers 650,000 people in California, 340,000 of whom are globally capitated. The company owns two hospitals, which participate in some of the full-risk contracts.
The license does not allow MedPartners/Mullikin to contract with employers directly. Larry R. House, the firm's chairman, president and chief executive officer, said the company "in no way is attempting to compete with our HMO partners. We are certainly not equipped from a marketing perspective to do so."
But it will allow the Birmingham, Ala.-based company to take a bigger slice of the healthcare dollar and reap the rewards for managing that slice, Wagar said.
"It gives us an ability to make the payer that much more efficient in the local marketplace. When we do global capitation, we cannot only give them predictable, manageable medical costs over time but also help them simplify administrative functions," Wagar said.