Watchdog Groups Question Whether Lawmaker’s Part Ownership of Medical Group Is Conflict of Interest

Assembly member Keith Richman's (R-Granada Hills) part ownership of the medical group Lakeside Health Care is a potential a conflict of interest because he has sponsored legislation that would benefit medical groups, the Los Angeles Times reports. California law prohibits any lawmaker from sponsoring legislation that would "directly benefit" a company in which the lawmaker owns shares or one that has paid the lawmaker a salary in the past year. However, if the bill would impact other companies as well, it is not considered a conflict of interest. Richman, a physician by trade and the former chair of Lakeside's board, recently sponsored two bills that would "improve the financial position" of medical groups. The first bill, which was vetoed last fall by Gov. Gray Davis (D), would have saved medical groups millions of dollars each year by banning contracts between insurers and medical groups that require the groups to cover the cost of "expensive injectable medications," such as those used in chemotherapy. Current legislation sponsored by Richman would require the Department of Managed Health Care to review contract offers that medical groups consider unfair. Under the bill (AB 1600), if the DMHC declined to intervene, the medical group could enter mediation and after that, if the group was still unsatisfied, it could file a lawsuit.

Richman said the bills were designed to address the "unfair" clout that managed care companies exert over medical groups during contract negotiations. He added that medical groups must often sign contracts "or lose patients." Richman said, "I can understand how (Lakeside ownership) may have the appearance of conflict, but I think that my arguments on the merits of any bills, including health care bills, need to stand on their own." He added, "I bring an expertise from my experience both as a physician and as a person who's run and served on the board of directors of a large medical group, and that I think brings value to the Legislature." Richman has sought an opinion from an attorney with the Assembly Ethics Committee, who concluded that his part ownership of the group does not amount to a conflict of interest. Regardless of that decision, several watchdog groups are "troubled" by Ricman's actions. Robert Stern, head of the Center for Government Studies, said, "If I were a legislator, I wouldn't be introducing legislation that affects my company. It just looks bad" (Bernstein, Los Angeles Times, 2/15).