DMHC Will Require Financial Data from Physician Groups

To "prop up troubled physician groups," the Department of Managed Health Care will soon require the state's 400 physician groups to submit "detailed quarterly reports and audited annual statements," the Los Angeles Times reports. Using standardized reporting forms, the department will evaluate "troubled" physician operations. The agency then plans to use the financial reports to "push" managed care companies to either "take steps" to help bolster the "ailing" groups or "sever ties altogether." The state also will require managed care companies to reveal to physicians certain "proprietary information," such as the ages and gender of members, which could be used in contract bargaining. Daniel Zingale, director of the agency, said that the data gathered by the state could possibly be made public, although the agency has not yet decided on the issue. While the department does not regulate physician groups, it can require them to give financial statements.

The California Medical Association estimates that about 80% of the state's physician groups have "serious financial problems," and the department hopes that requiring groups to submit financial statements will lead to "a more orderly system" of monitoring the groups' fiscal stability. However, managed care companies and physician groups alike have voiced concern over the department's action. Aileen Wetzel, associate director of the CMA, said that some smaller physician groups might have difficulty paying for annual certified audits, which can cost $30,000 or more. Dr. Arthur Southam, executive director of the Los Angeles-based California Association of Physician Organizations, added, "Some groups are worried [the department's action] could evolve into regulating medical groups." Meanwhile, managed care companies are concerned that disclosing proprietary information could "undermine their ability to negotiate contracts with physicians." Walter Zelman, president of the California Association of Health Plans, said that he fears that "the state might hold [health plans] responsible for medical groups failing" after the health plans provide the required information to the groups. The Times notes that the state's action could "backfire" if managed care companies subsequently terminate contracts more often and "force into bankruptcy some medical groups that could be saved." However, the state is "proceeding cautiously" to ensure this does not happen, one official said (Ballon, Los Angeles Times, 3/31).