Risk-bearing medical groups and independent practice associations are about to attract heightened financial scrutiny.
State regulators are busy implementing new risk-based capital regulations for health plans that will gauge how much exposure is passed to providers.
States are grappling with how much, if any, oversight they should give physician organizations. Regulatory options include setting minimum capital requirements and approving risk contracts.
But former Colorado Insurance Commissioner Jack Ehnes says most states probably will leave accountability largely with health plans, rather than try to oversee numerous complex risk arrangements.
Ehnes favors such a hands-off approach. "From a regulatory standpoint, if you become too intrusive, the system loses its flexibility," he says.
Some health plans are already stepping up oversight of their contracted physician organizations to protect themselves from service disruptions and liabilities for payments to physicians for services rendered.
Ehnes made news in January by ruling that under Colorado law, health plans were liable to pay physicians whose contracting organizations went bankrupt, even though the plans had already paid the physician organizations in advance for services.
Blue Cross and Blue Shield of Colorado and PacifiCare of Colorado led health plans in spearheading legislation to change the law, which they referred to as the "double-pay statute," but the bill died in committee.
Ehnes says keeping accountability with health plans forces them to maintain a "high level of attentiveness."
While physician organizations are likely to shun state regulation, they don't always fancy health plan oversight either.
In California, where state law allows health plans to scrutinize providers' books, medical groups don't want to convey confidential information that plans could leverage during contract negotiations.
A possible solution was offered in June, when five physician trade associations issued a proposal under which physician organizations would provide plans with a financial assessment conducted by an independent accounting firm or accrediting agency. If a plan wanted more information, its request would have to be approved by the commissioner of the state Department of Corporations.
California's health plans and medical groups are trying to agree on uniform financial reporting requirements. Despite the fact that the vast majority of physician organizations in the state have encountered financial trouble, both sides agree the state should not step in.
"There are legislators who want to directly regulate the medical groups," says Walter Zelman, president and chief executive officer of the California Association of Health Plans. "That would end up in an endless array of regulatory demands."