Wrong Prescription

More than half of physician-managed medical practices in California are teetering near bankruptcy, and doctors are not entirely wrong to blame penny-pinching health plans for at least some of the predicament. However, the doctors are attempting a cure that is worse than the disease.

The California Medical Assn. has documented that the problem is real. The seven health plans that control most of the state’s managed care market often do not make it easy for physicians to do business. They abruptly change criteria for determining patient eligibility, refuse to renegotiate contracts to cover effective new treatments and deliberately delay payment.

Physician group insolvencies disrupt patient care and undermine the sort of established doctor-patient relationships that clinical studies show are key to long-term health.

However, the association’s proposed solution--a radical bill to be heard in the Assembly next week that would effectively put government in the medical rate-setting business--would worsen the problem and accelerate the rising cost of health care for both individuals and employers.

The bill, AB 1600, by Assemblyman Fred Keeley (D-Boulder Creek), would give doctors antitrust exemptions so they could band together to demand arbitration when they didn’t like their contracts.

The fatal flaw in the Keeley bill is a provision allowing an arbitrator to set physician compensation rates in isolation from the market pressures that make managed care plans affordable. The only state authority that could conceivably do the job, the recently created Department of Managed Care, has said it doesn’t want to get into the rate-setting business. That has left the doctors association suggesting that the task be assigned to arbitration panels run by retired judges. But these so-called “rent-a-judges” have no experience in medical economics, and the criteria the bill puts forth for setting “fair and reasonable rates” (the increasing age of the population, new pharmaceuticals, the increasing sophistication of medical technology) reads more like a political treatise to drive up payments than a sensible guide to medical costs.

The Department of Managed Care has finally begun to crack down on part of the problem: health plans that irresponsibly delay payment to doctors. Last month, for example, the department imposed an unprecedented $250,000 fine on PacifiCare Health Systems Inc. for delinquent payment to doctors and hospitals. The state needs to keep this up, and do more.

Specifically, the department should aggressively implement a bill by Sen. Jack Scott (D-Altadena). Passed last year and soon to take effect, the legislation requires the department to identify and prevent “unfair payment patterns” such as denying claims for payments related to medically necessary care or for previously authorized treatment.

Although the medical association sponsored the Scott bill, it now says that government should go beyond ensuring that payment practices are fair and try to set the level of payments themselves. Government simply does not have the expertise to do this. Scott’s bill will in the long run serve doctors, patients and HMOs far more effectively than rate-setting.