For More Information CMA Comments on DMHC's Revised Financial Solvency Regs [Posted 10/28/04] DMHC Again Proposes Disclosure of Medical Group Financial Data [Posted 09/25/03] Medical Group Financial Disclosure Regulations on Hold [Posted 04/10/03]

The California Office of Administrative Law last week approved the Department of Managed Health Care’s (DMHC) financial solvency regulations. The final regulations—which will take effect next month—do not require public disclosure of physician groups’ confidential financial information, as had been proposed in earlier versions.

These regulations have gone through a number of revisions since the Legislature in 1999 passed a law (SB 260) requiring DMHC to address the solvency problems plaguing California’s physician groups.

CMA successfully sued DMHC in 2001 to prevent the department from disclosing groups’ confidential and proprietary financial statements. CMA argued that the requirement would give health plans an unfair advantage when negotiating contracts with medical groups, increasing the likelihood of physician group bankruptcies and the resulting disruptions in patient care. The Superior Court in Sacramento struck down the regulations, finding DMHC had failed to address the negative effects that the financial data disclosure would have on contract negotiations.

Responding to CMA’s concerns, the new regulations require that detailed proprietary financial statements and other records collected by DMHC be kept confidential. The regulations do allow DMHC to disclose to the public whether or not risk-bearing physician groups are meeting five financial solvency standards, including the percentage of claims that a group pays in a timely manner.

After substantial debate and discussion, DMHC included in the regulations a requirement that physician groups maintain at all times a minimum “cash-to-claims ratio” (cash, marketable securities, and certain qualified receivables, divided by total unpaid claims). The regulations require a cash-to-claims ratio of 0.60 beginning January 1, 2006; 0.65 beginning July 1, 2006; and 0.75 beginning January 1, 2007.

Contact: Astrid Meghrigian, 916/444-5532 or ameghrigian@cmanet.org.