Legislators Launch HMO Reform Efforts

Responding to the rapid growth of managed care health plans and a corresponding rise in HMO horror stories, state legislators this session have launched an unprecedented onslaught of intended reforms.

In the Assembly alone, nearly 50 bills on health maintenance organizations and related systems have passed. Most would impose new government controls. An additional 30 or so bills have moved through the Senate. Most have passed with large, bipartisan support.

With each house of the Legislature beginning work this week on the bills that have passed the other house, managed care plans and their practices have become a main focus of lawmakers’ attention.

The proposed new laws cover a wide range of complaints about health plans. Perhaps they fired the patient’s doctor; wouldn’t pay for a liver transplant screening; ordered a breast cancer patient out of the hospital just hours after the mastectomy.

Maybe they were just too slow to answer the phone.

Wherever California HMOs are suspected of cutting costs at the expense of patient well-being, legislative majorities have now risen up.

Among the bills that have passed one or the other house are measures that would mandate longer hospital stays for patients, coverage of mental health care and contraceptive devices, allow HMO members direct access to specialists, require health plans to pay for second-doctor opinions and, yes, require your HMO to answer the phone promptly when you call for an appointment.

Several of the provisions in the proposed bills would enact ideas that are similar to those in HMO initiatives that failed in 1996. Supporters of the initiatives attributed their loss at that time to opposition campaigns that vastly outspent them.

In the view of industry officials, much of the avalanche of proposed controls is positively “punitive,” according to Dr. Albert Martin, corporate medical director of Blue Shield of California.

Seen from the reformers’ standpoint, the industry has been stunned by the flood of bills coming at it, said Assemblyman Martin Gallegos, the driving force behind some of the toughest proposals. It’s as if managed care is looking at Sacramento and asking, “ ‘Did anyone get the number of that truck that hit us?’ ” said Gallegos (D-Baldwin Park), chairman of the Assembly Health Committee.

HMO lobbyist Myra Snyder of the California Assn. of Health Plans conceded that the industry is sponsoring no bills of its own this session, but says it is “working closely” with the authors of about 30 bills, some of which it supports.

Why all the attention now? More than 20 million Californians are dependent on some form of managed medical care, usually from a health maintenance organization, and HMOs are adding members in the state at the rate of about a million a year, according to the California Health Plans Assn., the industry’s trade organization. Take a massive health care industry with its collective eye on the bottom line, add a corresponding rise in patient complaints, and presto: Political instincts kick in, resulting in a flurry of legislative activity.

Among the most contentious bills are several that touch on who prevails in disputes over treatment--the doctor or the managed-care group to which the doctor is attached?

A whole cluster of bills come down on the side of the doctor by making it legally riskier for an HMO to turn down a physician’s recommendation for treatment.

Under some physician-backed bills, including one introduced by Sen. Tim Leslie of Carnelian Bay, a conservative Republican, whoever within a managed care organization turns down coverage would have to be licensed as a physician in California. The HMO’s legal liability for refusing paid treatment would rise accordingly, supporters say.

Sen. Herschel Rosenthal (D-Los Angeles), who is carrying a similar bill, said Californians are concerned about being denied care by “some person in the HMO [who] is making decisions and telling doctors whether or not they can do a certain procedure.” Those are calls a doctor should make, Rosenthal said.

Managed care lobbyists counter that virtually all such decisions are now made by medical directors who are doctors, even though most decisions are based on what is covered for payment, and rarely on medical judgments.

Two Assembly bills go further by requiring public disclosure of why treatment was refused. The legislation also would mandate a physical exam of the patient by an in-house doctor before a doctor’s treatment recommendation is turned down, thus substantially raising, even more, a managed care organization’s legal liability.

Another bill where interests clash would place new restrictions on an HMO’s ability to sever doctors from managed care groups--and therefore from their patients.

Now, HMOs are allowed fairly free rein to refuse to renew contracts, often of entire groups of doctors at one time.

Gallegos is the author of one “wrongful termination” bill that passed the Assembly on an overwhelming 53-13 vote.

It requires managed care networks to provide written reasons for dismissing doctors and opens the process to binding arbitration--a tool used in organized labor negotiations.

In normal contracting, complained industry lobbyist Snyder, that kind of due process is “just unheard of.” Normal termination of working agreements between doctors and health plans, she said, takes place for good reason, usually when a plan finds itself supporting too many doctors.

Another group of bills would, in effect, go straight to the patient’s hospital bedside. One would allow new mothers up to 48 hours of post-delivery hospital or after-hospital care, depending on doctor’s orders--a tougher standard for managed care providers than called for by federal legislation scheduled to take effect next year.

Still other measures seek tighter regulation by state agencies. Since 1975, when the HMO phenomenon was new, the regulatory job has been assigned to the obscure Department of Corporations, which mostly regulates securities dealers and mortgage bankers.

Rosenthal and others have introduced bills to transfer HMO regulatory authority to other agencies, including the departments of consumer affairs and insurance. Other bills would create a powerful HMO czar or establish a Department of Health Care Oversight.

Meanwhile, Gov. Pete Wilson has shown signs of seeing a need for beefed-up regulation of managed care.

A newly created governor’s task force of consumer, health care and insurance experts recently bumped to the top of its agenda an investigation into how best to reform regulation of HMOs.

Wilson is not saying what, if anything, he will sign out of the flood of managed care bills likely to hit his desk.

Phil Romero, the panel’s executive officer, said that Wilson has noted the explosion in managed care medicine and “thinks that after 25 years it is time for experts to look at this industry with a fresh set of eyes.”

But the governor also appears reluctant to endorse wholesale changes. He sees the managed care alternative successfully driving down the cost of health care overall, a position that is “standard Wilson Administration mantra,” Romero said.

Outside the government arena, a more aggressive backer of managed care reform is Health Access California, which leads a coalition of organizations of nurses, service employees unions and minority group members that tried unsuccessfully to go to the voters with health care initiatives in 1994 and 1996.

Now, Health Access is the sponsor of a so-called “patients bill of rights” made up of 13 key bills among the scores of legislative HMO control measures.

Bruce Livingston, executive director of Health Access, said his organization is delighted at the progress to date. The coalition’s bills are “not going to affect anyone’s bottom line, unless they are already giving poor care,” he said.

Industry backers disagree, saying costs are bound to rise if--among many examples they cite--second medical opinions become available to patients for the asking.

Martin, of Blue Shield, said that by advancing so many control bills, the Legislature is “practicing medicine,” and getting away with it because of “so much publicity and so many anecdotal horror stories.”

Gallegos said he agrees that “it’s not the Legislature’s place to legislate a 48-hour postpartum hospital stay.”

But as long as state regulation remains lax, and the industry remains “unresponsive to enrollees’ needs,” he added, “the Legislature will be taking the initiative.”

Someone, he said, “has to speak for the public.”

* DOCTOR’S SUIT: Physician says she was fired for advocating better care. A3

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Managed Care Legislation

Here is a sampling of major bills passed by the state Senate or Assembly seeking more regulation of the managed care industry:

* AB 434 by Assemblyman Martin Gallegos (D-Baldwin Park): Would compel a managed care network intending to dismiss a doctor to explain its decision and submit disputes to binding arbitration.

* AB 794 by Assemblywoman Liz Figueroa (D-Fremont): Would require managed care authorities who make decisions on patient care coverage to be licensed as physicians in California.

* SB 406 by Sen. Herschel Rosenthal (D-Los Angeles), AB 589 by Figueroa and AB 1344 by Gallegos: Would transfer state regulation of managed care organizations from the Department of Corporations to other state agencies or a newly created HMO state board.

* SB 253 by Sen. John Burton (D-San Francisco): Would encourage employees of health care facilities to report suspected unsafe patient care and protect such whistle-blowers against reprisals.

* AB 7 by Assemblywoman Valerie Brown (D-Kenwood), SB 70 by Sen. Tom Hayden (D-Los Angeles) and AB 12 by Figueroa: Would permit certain minimum hospital stays after patients undergo breast cancer surgery or a lymph node exam.

* AB 38 by Figueroa: Would allow the mothers of newborns a hospital stay of up to two days after normal delivery, or four days after a caesarean section.

* SB 330 by Rosenthal: Would require prior state approval of HMO mergers, with the intent of curbing monopolies and encouraging competition.

* AB 497 by Assemblyman Scott Wildman (D-Los Angeles): Would require state oversight to ensure that patients calling managed care units wait no longer than about 5 minutes before they are connected, and that an appointment with a physician be made within 10 working days, or one day if the patient says it’s urgent.