The California Medical Association has filed suit against eight of the state's health plans in an effort to assure that physicians get paid even when their managed-care contractors go under.
In the lawsuit, filed Sept. 1 in California's Superior Court, the CMA asserts that California's health plans should be held responsible for payments doctors don't receive when an independent practice association goes bankrupt.
"The system has proven that it will break," says John Edwards, the attorney representing the CMA. "The whole system will not, cannot work if the situation we have now is allowed to continue."
Named as defendants are Aetna U.S. Healthcare, Blue Cross of California, Blue Shield of California, HealthNet, MaxiCare Health Plans, PacifiCare of California, Prudential Healthcare and United Health Care of California.
California state law requires health plans to pay uncontested claims within 30 days or 45 days if the plan is an HMO. In its lawsuit, the CMA claims health plans aren't paying within the prescribed time frame and, more importantly, that the health plans' low premiums are sinking physician practices. More than 85% of Californians who receive employer-based healthcare benefits are enrolled in managed-care plans.
The trade group representing the health plans, the California Association of Health Plans, contends the issue already was settled in a December 1998 ruling by the state Department of Corporations that denied a request from the CMA to hold health plans liable for payment, regardless of whether the payments involved contracts with IPAs.
The CMA asserts that, at its heart, the suit centers on the health plans' insistence that physicians must get payment from their IPAs. Such a requirement is illegal, the CMA says, and its suit requests that the court rule health plans are accountable to physician providers even when their IPA goes bankrupt.
Several IPAs and managed-care contractors, including physician practice manager FPA Medical Management, have gone bankrupt. The CMA argues that the health plans named had an obligation to expect the IPAs might not make it, given the history of other IPAs and the low reimbursement rates they were receiving.
The ramifications are significant, Edwards says. While there may be a role for the IPAs, the health plans ultimately should be held accountable for ensuring providers get paid, he says.
The HMOs have an obligation to charge employers enough in premiums to cover the cost of care, Edwards says. The low premiums in California are making it difficult for physicians to survive. "The amounts are simply not realistic."
Current premiums in California average 20% to 40% less than those in the rest of the country.
The CMA initially filed its suit in July but didn't announce it had done so until the last week of the state's legislative session, a move the CAHP says was politically motivated. The CMA counters that the timing was coincidental.
One defendant, PacifiCare, denies the allegations and, in a statement, said the health plan "works closely with all of its contracted medical groups and IPAs to ensure timely and appropriate payment."
Most of the other health plans named in the suit declined to comment. Several referred inquiries to the CAHP, which represents 38 of the 42 licensed health plans in the state. The CAHP, which was not named as a defendant, believes the health plans met their responsibility once and shouldn't be required to pay twice, says Cory Black, spokesman for the CAHP. After a health plan has paid an IPA, the plan no longer is obligated to ensure the payment was passed along to the IPA physicians, he says.
The CAHP also has emphasized that doctors voluntarily contract with IPAs. In California, doctors can be employed only by other doctors. And as is true throughout the country, forming physician groups is an effective way to get referrals, be part of a larger network and ease negotiations with payers.
Black says the CMA wants employers to pay higher premiums to help providers get bigger profits, a change he says would drive up the cost of healthcare.
On the other side of the argument, Daniel Higgins, M.D., believes the health plans should be held accountable for ensuring physicians are paid. Higgins is medical director of emergency services at St. Francis Medical Center in Lynwood, Calif.
"If plans are allowed to contract with whomever, and then throw up their hands and walk away, what kind of precedent does that set?" he says. "They could contract with Jeffrey Dahmer or Charles Manson. Where does the buck stop? We think it stops with the people who are taking 15 percent off the top for administrative fees."