One-Fourth of California Medical Groups Fail to Meet State Standards for Financial Solvency
Almost a quarter of California's physicians' groups "fal[l] short" of the state's financial solvency requirements, "threatening their continued existence," Department of Managed Health Care Director Daniel Zingale said yesterday, the Los Angeles Times reports. Using data from the first quarter of this year, DMHC determined that about 25% of the more than 200 doctors' groups in California had assets worth less than 70% of what they owed to others. Twenty percent of the groups had a negative net worth and "barely any tangible assets." This summer, the state reported that 56% failed "at least" one of the state's four fiscal solvency measures. This year marks the first time that physician groups have been required to report financial information to the state. Presenting his findings yesterday to the Financial Solvency Standards board, which advises DMHC, Zingale said that he is considering "tak[ing] punitive action" against medical groups that are losing money. The Times reports the state could require HMOs to "sever" contracts with the groups or to stop enrolling members in "troubled" groups. Zingale said that he is "inclined" to take action against groups that do not submit the required financial information to the state. He could publish such groups' names in newspapers or prevent HMOs from enrolling patients in the groups, the Times reports.
Although the state released figures on medical groups as a whole, individual groups' performance on the solvency measures was not disclosed. Zingale said he "would like" to release that information on Oct 1., saying public disclosure will help doctors' groups "take more aggressive steps" to remedy their "financial health." However, the California Medical Association is "threatening" to sue to keep the information confidential, concerned that it would give managed care plans "too much" information on the financial situation of the medical groups during contract negotiations. But health plans, which support making the information public, say they are already aware of medical groups' financial situation, as contracts typically allow HMOs to "examine their books." CMA executive vice president and chief executive Jack Lewin said, "[R]egulators [should] take appropriate action based on the degree of insolvency and the specifics of each organization that doesn't meet the standard. That's a far more rational approach than assuming that publishing these figures will make a difference." The state Office of Administrative Law will determine by next week whether disclosing the information publicly conflicts with the state law mandating collection of the data (Ornstein, Los Angeles Times, 8/22).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.