By Lisa Rapaport, The Sacramento Bee, Calif. Knight Ridder/Tribune Business News
Mar. 6--In a complex legal battle pitting the advocacy goals of state HMO regulators against the business concerns of physicians, a Sacramento Superior Court judge has barred the California Department of Managed Health Care from releasing medical groups' financial records.
Regulators had planned to release physician groups' financial data last year in compliance with a new state law aimed at preventing disruptions in patient care that come when medical practices go broke and close their doors.
But the California Medical Association took the state's HMO regulators to court, arguing that any disclosure of detailed financial information would expose medical groups to greater risk of insolvency by giving health insurers an unfair advantage in contract negotiations.
In a ruling released Tuesday, Judge Gail D. Ohanesian sided with the doctors' organization, calling state regulators' attempts to disclose balance sheet details 'arbitrary and capricious.'
Daniel Zingale, director of the HMO agency, said the ruling effectively shuts down state efforts to enforce minimum financial solvency standards for medical groups.
'I don't see how you can craft a corrective action plan to facilitate a financial turnaround if you don't have access to the books,' Zingale said.
When physician groups close without warning, patients can be left without access to their doctors or medical records, and health care providers can be left with stacks of unpaid bills.
State regulators said they have used financial reports to avert disruptions in care for about 250,000 patients by directing health plans to assign members to solvent medical groups, shunning fiscally unstable practices. While the California Medical Association has not disputed Zingale's right to collect financial data, doctors believe actions taken by the department may be doing patients more harm than good.
'If the health plans said this group is not as strong as the other group and we better move our patients now rather than later, it would pretty much destroy the group that is struggling to get back into financial health,' said John Whitelaw, president of the California Medical Association.
The law, authored in 1999 by State. Sen Jackie Speier, is hardly clear on how far state regulators should go in gathering data or what enforcement actions Zingale might take against faltering medical groups.
But the law does require data collected by the department to be kept confidential, Speier said.
Tuesday's ruling upholds this law, but strikes down overly broad enforcement regulations proposed by Zingale, Speier said. In her reading, nothing prevents the department from continuing to collect quarterly reports from medical groups.
'There's no harm that comes to consumers in this ruling. I would argue that it has constrained the department from interpreting the statute more broadly that it was supposed to be applied in the first place,' Speier said.
Late Tuesday, regulators remained unsure if they would appeal the ruling.
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(c) 2002, The Sacramento Bee, Calif. Distributed by Knight Ridder/Tribune Business News.
