FPA Medical Management in San Diego has become the third California provider group to receive a modified Knox-Keene license that allows it to take on full-risk contracts from HMOs.
The Knox-Keene Health Care Service Plan Act is California's HMO and PPO enabling legislation. The state this year began granting modified licenses under the law to providers that want to act like insurers as long as they meet financial solvency requirements. The modified license allows providers to contract with insurers but not directly with employers or individuals.
The license "permits us to negotiate global capitation contracts with HMOs in California. The Department of Corporations in the last year has taken the position that our type of company is taking risk and therefore has to be licensed" under Knox-Keene, said James A. Lebovitz, FPA senior vice president and general counsel.
The license will allow Family and Senior Care, FPA's California managed-care operation, to take capitated payments from HMOs covering both physician and hospital services.
FPA organizes and manages primary-care physician networks to contract with HMOs in nine other states: Arizona, Delaware, Florida, Michigan, New Jersey, North Carolina, Pennsylvania, South Carolina and Texas.
With last week's acquisition of two Foundation Health Corp. medical groups, there are 4,049 physicians in FPA-managed networks. FPA's pending merger with Downey, Calif.-based AHI Healthcare Systems would pump that number up to about 6,400.
No other states have required FPA to obtain a license to take on full risk, although "other states are looking at this," Lebovitz said.
California has awarded the modified license to Mullikin Medical Centers of Long Beach and California Pacific Medical Group in San Francisco. Several more applications for modified Knox-Keene licenses are pending at the agency, said Anita Ostroff, senior counsel at the state's department of corporations.
Friendly Hills Healthcare Network withdrew its application for a modified Knox-Keene license in California when its former parent, Caremark International, was acquired by MedPartners, Ostroff said. MedPartners now is embroiled in litigation with former Friendly Hills executives recently terminated by MedPartners (See story, p. 6).
FPA also provides contract management and support services to hospital-based emergency departments in 20 states.