DMHC Again Proposes Disclosure of
Medical Group Financial Data
[Posted 09/25/03]

The Department of Managed Health Care (DMHC) recently published a revised draft of its proposed regulations that would mandate full public disclosure of physician groups’ confidential financial information. CMA this week submitted comments on the revised proposal.

DMHC continues to misinterpret SB 260, the financial solvency legislation passed by the Legislature in 1999. In the letter, CMA president Ronald Bangasser, M.D., emphasized that SB 260 is not a disclosure statute but rather one that provides a framework for DMHC to collect financial information on risk bearing organizations so the agency can address the solvency problems plaguing California’s physician groups.

CMA successfully sued DMHC in 2001 to prevent the implementation of similar disclosure regulations. CMA argued that the regulations ignored the intent of the law, which was to reduce the number of future bankruptcies. CMA noted that the 2001 regulations would give health plans an unfair advantage when negotiating contracts with medical groups, increasing the likelihood of physician group bankruptcies and disruptions in patient care. A Sacramento Superior Court struck down the regulations, stating that DMHC had failed to address the imbalance that financial data disclosure would create in contract negotiations.

In his comments, submitted to DMHC on September 23, Dr. Bangasser urged the department to withdraw its latest proposal, pending the governor’s signature on a bill (SB 261) that will provide DMHC with explicit guidelines governing disclosure. These guidelines should ensure that information is disclosed in a manner that does not adversely “impact the integrity of the contract negotiation process.”

Specifically, SB 261 would require DMHC to collect medical group financial information and disclose to the public whether or not risk-taking physician groups are meeting the four financial solvency standards already in law.

However, the bill dictates that detailed proprietary financial statements are to be kept confidential unless the group fails to meet one or more of the financial solvency standards for two consecutive quarters or the group knowingly submitted fraudulent reports.

SB 261 provides guidelines for what information DMHC can make public, including the percentage of claims that a group pays in a timely manner and, if the group fails to meet one of the standards, the actions the group is taking to correct any deficiencies. CMA believes this additional data will provide a more accurate picture of a group’s financial situation.

Click here for a copy of CMA’s comments.

Contact: Aileen E. Wetzel, 916/444-5532 or awetzel@cmanet.org.