Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Awards
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
    • Women in Healthcare
    • - Luminaries
    • - Top 25 Diversity Leaders
    • - Leaders to Watch
    • - Luminaries
    • - Top 25 Women Leaders
    • - Women to Watch
  • Events
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Custom Media Event: ESG Summit
    • Transformation Summit
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Leadership Symposium
    • Health Care Hall of Fame Gala
    • Top 25 Women Leaders Gala
    • Best Places to Work Awards Gala
    • Top 25 Diversity Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain Revenue Cycle
    • - Hospital at Home
    • - Workplace of the Future
    • - Strategic Marketing
    • - Virtual Health
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Physicians
October 01, 1999 01:00 AM

Burden of proof

California tells groups to show they can handle risk

Molly Tschida
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    California's risk-bearing medical groups and IPAs are in such dire financial condition that the state recently passed a law requiring physician organizations to meet certain financial solvency standards before accepting risk contracts.

    The financial collapse of the physician practice management firms FPA and MedPartners garnered much media attention, but their failures are only part of the story. The California Medical Association recently released a report highlighting the dismal state of all of California's medical groups. According to the CMA, 13 physician organizations have received limited Knox-Keene licenses since 1995. The license allows physicians or hospital groups to assume full risk, provided they contract with a licensed HMO.

    Of those 13, one has filed for bankruptcy, one has been placed in conservatorship in state court, two have surrendered their license due to insolvency, one is on monthly fiscal watch, and only one seems to be doing fine.

    The report declares that better financial oversight of physician organizations could have avoided such financial disasters as the MedPartners bankruptcy.

    The new legislation creates a financial solvency standards board. That board will be responsible for the oversight of all risk-bearing organizations, including small groups that accept risk on a limited basis. Under the legislation, beginning July 1, 2000, any organization accepting risk will be required to furnish financial information, such as an annual audited financial statement or monthly summary activity, to any health plan it accepts risk from.

    Eventually, all risk- bearing organizations' financial solvency will be graded, based on the groups' ability to pay claims on time, estimate incurred but not reported claims, maintain positive tangible net equity and maintain positive working capital.

    In turn, the health plans must turn over to the physician organization financial information of their own, including enrollee data on a monthly basis, and data on risk arrangements (such as information on withholds) on a quarterly basis. In addition, health plans will be required to pay all risk arrangements within 120 days after the close of the fiscal year.

    The Legislature also voted to create a Department of Managed Care. Up to now, California's managed care organizations were under the umbrella of the state Department of Corporations. The director of the new Managed Care Department will sit on the financial solvency standards board and appoint seven other members.

    Many California providers welcomed the new legislation but were disappointed another bill that would have increased capitation rates failed.

    "I believe risk-bearing organizations need to be solvent, but at the same time they need to have sufficient revenue so they can bear the risk," says Michael Abel, M.D., president of Brown and Toland, a 2,300-physician IPA in San Francisco. Brown and Toland had until recently accepted risk for 260,000 patients, but the IPA earlier this year surrendered its limited Knox-Keene license and got out of the global risk business.

    "In order for a provider organization to be financially solvent, the health plans have to pay enough money. They can't just pass the risk without passing on the reasonable amount of money to ensure you can provide care," he says.

    Frank Matricardi, principal of Los Angeles- based Phoenix Healthcare Consulting and a lobbyist for the IPA Association of America, agrees that the legislation is a small step forward but said it also leaves major questions unanswered.

    "There's a huge economic imbalance between the power of the health plans and the power of the provider organizations," he says. "We think the solvency standards discussion is a good first step toward restoring the economic balance of power between these organizations, but we need to find a way for the plans to get the risk pool monies to the providers so that this will help them to meet the solvency standards."

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Copy of mh_20180709-Medical-students_WEB_i.jpg
    HBCU known for placing grads in med school planning its own
    Doctor showing a patient information on a tablet.
    Missouri tried to fix its doctor shortage. Now the fix may need fixing.
    Sponsored Content
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Nominate/Eligibility
      • 100 Most Influential People
      • 50 Most Influential Clinical Executives
      • Best Places to Work in Healthcare
      • Excellence in Governance
      • Health Care Hall of Fame
      • Healthcare Marketing Impact Awards
      • Top 25 Emerging Leaders
      • Top 25 Innovators
      • Diversity in Healthcare
        • - Luminaries
        • - Top 25 Diversity Leaders
        • - Leaders to Watch
      • Women in Healthcare
        • - Luminaries
        • - Top 25 Women Leaders
        • - Women to Watch
    • Events
      • Conferences
        • Transformation Summit
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Leadership Symposium
      • Galas
        • Health Care Hall of Fame Gala
        • Top 25 Women Leaders Gala
        • Best Places to Work Awards Gala
        • Top 25 Diversity Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain Revenue Cycle
        • - Hospital at Home
        • - Workplace of the Future
        • - Strategic Marketing
        • - Virtual Health
      • Webinars
      • Custom Media Event: ESG Summit
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing