California begins asking physician groups about finances

Physician groups say the state's new solvency standards might put them out of business, but state officials say they simply want basic accounting principles followed.

By Leigh Page, AMNews staff. April 23/30, 2001.

After years of helplessly watching physician groups go out of business, California is beginning to phase in the state's first financial solvency standards for an estimated 350 to 500 independent practice associations and others that accept insurance risk.

The new rules are milder than those being developed in states such as Colorado and New York, but executives at many California groups worry that the cure will be worse than the illness and may drive some of them out of business.

The California Assn. of Physician Organizations, which represents 70 affected groups, estimates that one-third of all groups won't be able to meet the standards, which apply to all capitated groups with claims-processing responsibilities.

Rule phase-in starts with a May 15 deadline for reporting financial data and should be completed some time next year, when the state starts grading groups and requiring low scorers to improve their finances. But CAPO wants the state to postpone full implementation for at least three years so groups can accumulate reserves and not have to worry about low scores scaring away HMOs and patients.

"We have been making money the past three years, but I can't say we would pass all the parameters," said Frank Federico, MD, president and CEO of Lakeside Medical Group in Glendale, Calif., a group practice-IPA hybrid that covers 80,000 lives.

But CAPO's request only exasperates Scott C. Syphax, chair of the Financial Solvency Standards Board of the California Dept. of Managed Health Care, which is creating the standards. [...]