Friendly Hills HealthCare Network, based in La Habra, Calif., has become the second integrated network to seek a limited Knox-Keene license.
MedPartners/Mullikin received such a license in March.
The license would allow Friendly Hills to contract with HMOs and receive capitation payments covering both physician and hospital services. It would not allow direct contracting with employers.
Friendly Hills had been accepting the "global" contracts when it was a physician network that owned only one hospital. But state regulators required the license after Friendly Hills and its parent, Caremark International, acquired Cigna HealthCare of California's medical group and clinics and entered contractual arrangements with 12 hospitals.
"We're operating in a much larger geographic territory than the old Friendly Hills networks," said Elliot Kuida, Friendly Hills' senior vice president for planning and development.
Getting the license required demonstrating "substantial" tangible net equity, proving that specific quality-improvement processes are in place and also showing the company has ways to monitor patient access to care. It also required demonstrating that the network has an "appropriate number of physicians and specialists, either as staff physicians or under contract," to care for patients and that a grievance procedure is in place, Kuida said.
Friendly Hills includes more than 500 physicians and allied health professionals and 45 healthcare centers in Los Angeles, Orange, Riverside and San Bernardino counties. It provides care to about 380,000 patients enrolled in 25 HMOs and other plans.