CMA Opposes Attempt to Change DMHC’s Criteria for Determining 'Reasonableness' of Fees
[Posted 06/15/06]

The California Association of Physician Groups (CAPG) recently submitted a petition to the California Department of Health Services urging the department to reopen its Claims Settlement Practices Regulations and modify the criteria used in the regulations for determining the reasonableness of fees charged by noncontracted physicians for emergency services provided to health plan enrollees. Specifically, CAPG wants DMHC to modify the Gould Criteria, the nationally accepted standard for determining fair and reasonable payment for health care services.

CMA strongly objects to reopening this settled issue and believes CAPG’s recommended Gould modifications would undermine ongoing efforts to create a fee dispute resolution mechanism, ultimately hurting physicians in all modes of practice. Unlike CMA, which has membership from across the spectrum of practicing physicians in California, CAPG represents large, capitated medical groups that operate under the delegated model.

The Gould Criteria require consideration of the following evidence when deciding the “reasonableness” of fees charged by a noncontracted physician:

• The physician’s training, qualifications, and length of time in practice
• The nature of the services provided
• The fees usually charged by the physician
• The fees usually charged in the physician’s geographic area
• Other relevant economic details of the physician’s practice
• Any unusual circumstances

CAPG wants to add three additional criteria to DMHC’s claims settlement regulations:

• Average payor contract rates in physician’s geographic area
• Fee schedule rates of governmental payors
• Average amount for the service paid to and accepted by noncontracted providers in the geographic area

The last bulleted item may merit consideration in a discussion of reasonableness, if such data were available. However, CMA believes that accepting average contract rates and governmental payors' fee schedules are irresponsible recommendations that would in a very short time force all physicians to accept whatever health plans and government payors choose to pay.

CMA recently wrote a letter to DMHC Director Lucinda Ehnes, urging her to deny CAPG’s request to reopen the regulations. “The current regulation reflects the only judicially approved criteria for evaluating the usual, customary and reasonable fees of noncontracted physicians,” wrote CMA CEO Jack Lewin, M.D. “In adopting this regulation, the department properly refrained from crossing the line into impermissible rate regulation, while still providing guidance.”

CMA understands that risk-bearing organizations (RBOs) may be having difficulty complying with the Claims Settlement Practices Regulations. CMA has urged DMHC to ensure that capitation payments to RBOs are adequate to cover the costs of complying with these regulations.

Click here to download CMA's letter to DMHC on this issue.

Contact: CMA’s legal information line, 415/882-5144 or legalinfo@cmanet.org.