MEDPARTNERS: DOC Tells CA Physician Network to Cease, Desist
MedPartners Provider Network Inc. of California last week was issued a "cease-and-desist" order by the state Department of Corporations prohibiting the company from transferring funds to its Alabama-based parent company, MedPartners Inc. The DOC said it was "taking steps to ensure that MedPartners can continue to meet its obligations to provide health care services under the Knox-Keene Act" because a "routine" financial examination revealed the California physician management company was not a "fiscally sound operation" (Wall Street Journal, 3/8). The DOC also found that the provider network, which provides health care for 1.3 million Californians, "may not have sufficient cash to pay new claims," as its cash reserves have been drained by $21.5 million in overpayments to hospitals. Moreover, the company has been "so slow in processing claims that 200,000 remained unpaid as of September," causing some health plans to withhold payments. To make matters worse, the provider network "underestimated the value of its outstanding claims," set capitation rates too low and contracted with many doctors groups with "negative cash flow," according to the DOC report.
According to the Los Angeles Times, the DOC's action "is meant to ward off the kind of health care catastrophe experienced by patients and doctors when a health plan goes out of business or runs into trouble"; many in California are still reeling from the bankruptcy of another physician management company, FPA Medical Management Inc. (Bernstein, 3/9). The DOC said it plans to conduct a "nonroutine" financial examination of MedPartners, but in the meantime, the company can still pay "capitation and compensation to contracting and noncontracting providers." In a statement, MedPartners said it was "surprised" by the cease-and-desist order, but that it was "confident" it would be able to convince the DOC that the provider network is a "fiscally sound operation" (Journal, 3/8). MedPartners spokesperson Robert Mead said company officials met Monday with regulators "to work out a solution" (Times, 3/9).