When Craig Thayer, M.D., had trouble with late and denied claims from FPA, the San Diego-based physician practice management company that negotiates and manages his HMO contracts, he wasn't sure where to turn.
The Placerville, Calif., general surgeon tried complaining to the California Department of Insurance and the Department of Corporations, which regulates HMOs, but he was told by each that they didn't oversee PPMs. In fact, one Corporations spokeswoman said she had never heard of PPMs.
In frustration, Thayer considered a lawsuit and organized his patients to write letters of complaint. He believes the company, sensing growing unrest among the patients, decided to "silence" him with a check, because he eventually received $25,000 from FPA, about half of what he says he is owed.
Thayer's confusion over where to turn is not unusual. PPMs fall into a regulatory gray area, and many in the healthcare industry are equally confused.
"There probably will be some regulation, but whose responsibility are they?" asks Tom Mayer, a Huntington Beach, Calif., healthcare consultant who runs seminars warning physicians about the perils of PPMs. "They fall in a crack between the regulating bodies. Are they insurers, payers or providers?"
The problem is, PPMs are all of that and more. They offer physician groups a variety of services. Some physicians hire PPMs simply to manage their administrative and billing needs. Others sell their entire practices to PPMs and become PPM employees. And still others hire PPMs to handle HMO contracts. Under Thayer's arrangement, FPA receives the capitated payment from the HMO; it then reviews the claim, takes a percentage for itself, and pays Thayer on a discounted fee-for-service basis.
The industry is young -- most PPMs have been around less than 10 years and manage only an estimated 5% of the nation's 650,000 physicians. And to date, most provider problems with PPMs have revolved around contractual agreements that have been settled in court. For example, there are a number of lawsuits pending against the Dallas eye-care PPM Physicians Resource Group (see Comeback, page 3).
Physicians like Thayer and his Sacramento-area colleague Terry Zimmerman, however, are reluctant to spend time and money waging legal battles, and they wonder whether other options exist.
Zimmerman, a Folsom, Calif., plastic surgeon, says he has had problems with denied, underpaid and late claims from FPA ever since the company purchased a large Sacramento-area IPA a few years ago. Zimmerman, like Thayer, receives referrals from a network of FPA-owned physician practices and receives monthly capitated payments from the PPM.
As far as Zimmerman is concerned, PPMs walk and talk like HMOs, so physicians should have the same recourse that they do with HMOs. In California, HMOs, and any other organization that assumes full-risk capitation, fall under the jurisdiction of the Department of Corporations, according to the Knox-Keene Act.
Physicians and patients can appeal to the Department if they have problems with HMOs.
According to the California law, all risk-bearing entities must obtain what is known as a Knox-Keene license. Limited license holders, including PPMs and provider groups, can get full capitation from a health plan and either employ or contract with physicians, but they cannot market directly to consumers.
A Department of Corporations spokeswoman (the same woman who said she was not familiar with PPMs) says, because PPMs are limited Knox-Keene licensees, the Department would become involved only if the PPM was affecting access to care or the quality of care. But as Mayer points out, "Nobody sees late payments as detrimental to patient care."
However, if a determination was made that a PPM was guilty of corporate practice of medicine or fee splitting, that would be of interest to the state's medical boards, and physicians would have recourse, he says.
Last fall, the Florida Board of Medicine ruled that the contract between PRG and a 15-physician group was illegal because it violated fee-splitting regulations.
Another Florida physician is now suing the company in county court, citing the board's decision as precedent.
The regulatory maze doesn't end there. If a PPM is a public company, the Securities and Exchange Commission will keep an eye on it to protect shareholders.
Clearly, says attorney Paul DeMuro, PPMs don't fit neatly under one regulatory body.
"I think it would be unfair to regulate PPMs just for being PPMs," says DeMuro, who practices in the San Francisco office of the firm Latham & Watkins.