The first report on medical group financial solvency from California's Department of Managed Health Care raised both eyebrows and questions. Some called the report surprisingly good news, while others said it confirmed their belief that California healthcare is in crisis.
And some questioned the effectiveness of the law, passed last year, that requires the state's medical groups and health plans to report certain financial data on a regular basis.
The first report on that data was issued in late June. Health plans are required to submit data that will be shared with medical groups. If the plans fail to submit the information, the state can issue fines but has not yet done so.
Medical groups must submit financial information as well, but the agency has no enforcement powers over them.
"It's not a concern to me that (the state) can fine us," says Walter Zelman, president and CEO of the California Association of Health Plans, which represents 36 plans. "It's always been a concern to us that . . . they have no power regulating the medical groups. We are increasingly concerned . . . (about) the inability of the system to produce equal enforcement agencies."
Meanwhile, the California Medical Association wants the DMHC to enforce the penalties against health plans. "The data (from health plans) hasn't been forthcoming," says Aileen Wetzel, associate director of the CMA. "It's been one excuse after another."
The allegation that health plans haven't provided medical groups with data is false, says Zelman. "It's not a matter of intentionally violating the law. It's a matter of a whole set of new requirements being in place and people getting geared up to meet them."
Anytime new standards are introduced, it takes a while for people to adjust and meet them, he says.
Calls to penalize health plans are premature, Zelman adds. "If months from now the health plans consistently aren't delivering the required information to medical groups, if they haven't adequately explained to the regulator why not, then that's the time to consider fines."
Officials with the state agency didn't return phone calls seeking comment.
Roughly 10 million Californians receive care from health plans via medical groups. Groups that cover about 7.5 million enrollees reported their financial information; agency officials are not sure why the other groups didn't report.
Of those reporting, about 55%, or groups that cover about 4.1 million enrollees, failed to meet at least one of the solvency standards.
Many of the groups that did not report are smaller practices, says Ronald Bangasser, M.D., who is part of the financial solvency standards board, an advisory panel to the DMHC.
Groups of all sizes need more money from health plans in order to comply with the requirements because many cannot afford the technology to report, he says.
California is one of nine states that in 2000 passed laws requiring some type of financial standards for medical groups and IPAs to guard against insolvency.
When the DMHC opened its doors in July 2000, one of the first charges was to develop solvency standards. Temporary regulations were issued in March.
The CMA and CAHP disagree on the number of medical groups and IPAs that have closed due to financial problems or filed for bankruptcy. CAHP data shows that since 1998, 19 medical groups have filed for bankruptcy while another 13 have closed for financial reasons. CMA data show that 41 medical groups have closed or filed for bankruptcy since 1998.
However, a recent study by consultants Cattaneo & Stroud funded by the California HealthCare Foundation found that the number of medical groups that closed for financial reasons stands at 36 since 1996.
CMA officials say DMHC data supports their contentions. It was not surprising, Wetzel says, that 44% of the medical groups met the four financial solvency criteria. Wetzel, who serves on the standards board, says the board will develop corrective action plans for medical groups that don't meet the solvency standards.
To keep physicians in business, DMHC officials must force plans to provide the data and develop actuarially sound contracts with medical groups, Wetzel says.
But CAHP officials say the report shows the medical groups are healthier than CMA officials claim.
"From what people were saying, I thought 10% or 20% would meet the criteria. Close to 50% of them are meeting all of them. Two-thirds are meeting some of them," Zelman says.
Information pleaseCalifornia's temporary financial standards
Each month, plans must:
- Give medical groups specific information on each enrollee assigned to the medical group
- Notify medical groups of enrollees added to or terminated from each medical group
- Create a matrix of which entity is responsible for what medical expenses, i.e., pharmacy, and expected utilization rates and costs for certain service groups
- Provide all factors used to adjust payments
- Financial statements, including a balance sheet and income statement
- Statement of the percentage of claims paid, contested or denied
- Statement on whether the organization has maintained a tangible net equity
- Statement on whether it has estimated or documented its liability for claims incurred but not reported
Source: California Department of Managed Health Care