Senator Rails Against HMO Lawsuits : Health care: Panel chairman says firms are using courts to try to weaken regulators.

As health maintenance organizations come under increasing scrutiny for their growing market clout and cost-cutting practices, the chairman of the Senate Insurance Committee on Tuesday accused HMOs of trying to stymie regulators’ efforts to monitor the industry.

“I’m very concerned that HMOs are filing lawsuits to undermine the state’s efforts to protect health plan members,” said Herschel Rosenthal (D-Los Angeles).

At a public hearing Tuesday, Rosenthal said he will propose legislation this year designed to strengthen the state’s regulatory power over HMOs and restrict the use of mandatory binding arbitration clauses in health plan contracts.

Rosenthal’s committee heard sharply contrasting testimony from the state’s top HMO regulator and representatives of HMOs and physician and consumer groups. The hearing was prompted by two recent lawsuits in which HMOs have challenged the authority of the California Department of Corporations to regulate health plans, and by issues raised in a Los Angeles Times series of articles on HMOs last summer.

“As HMOs have moved more from nonprofit to for-profit entities, we are beginning to see the dollar having more impact over patient care,” said Rosenthal, who earlier this year spearheaded legislation to better protect California’s 13 million HMO members.

The hearing occurred the same day that U.S. House Speaker Newt Gingrich, speaking to the American Medical Assn., reiterated his call for congressional hearings on HMOs. The Republican-led Congress is seeking an expanded role for managed-care health plans in government insurance programs for the elderly, disabled and poor.

“Any concentration of power in America has to be looked at,” the Georgia Republican told the physicians’ group, according to Bloomberg Business News. “Clearly, health maintenance organizations run by large insurance companies are concentrations of power.”

In Sacramento, insurers and regulators clashed over a lawsuit by Fountain Valley-based FHP/ TakeCare that challenges the Department of Corporations’ authority to impose a $500,000 fine against the HMO for allegedly denying care to 9-year-old cancer patient. FHP has denied the allegations, and its lawsuit contends that the state’s fine far exceeds the amount allowed by California law.

Calling FHP/TakeCare’s actions “egregious,” Corporations Commissioner Gary Mendoza told the panel that “there is no doubt in our minds that we are within our authority to assess this penalty.”

Maureen O’Haren, legislative affairs director for the California Assn. of HMOs, argued that Mendoza overstepped his authority by imposing the fine and said that HMOs cannot be punished for medical decisions made by doctors, not the HMOs.