State Ordered to Not Collect Doctor Data

A Superior Court judge in Sacramento has ruled that the state’s HMO regulators cannot collect or distribute information on the financial stability of medical groups.

Judge Gail D. Ohanesian rejected the state’s argument that the public has a right to know if doctors’ organizations are on the verge of insolvency, calling the state’s regulations arbitrary and capricious.

She sided with the California Medical Assn., which filed a suit in September. The ruling marks the latest in a string of legal defeats for the Department of Managed Health Care, which has been criticized by doctors and health plans for exceeding its authority.

The department’s director, Daniel Zingale, said the decision is a stinging defeat for consumers. Without data, patients will be left unprepared if their doctors’ group folds, he said. The ruling, dated Feb. 28, was released Tuesday.

The order “essentially puts us back to where we started--without any regulation or oversight of medical groups,” Zingale said. “I thought there was broad agreement that this was not a good situation, certainly not for patients.”

The California Medical Assn. said it was not seeking to prevent Zingale’s agency from collecting the data for its own use, nor was it trying to prevent regulators from disclosing in general terms whether individual medical groups passed solvency standards.

It simply objected to detailed disclosures of proprietary information, said President Dr. John M. Whitelaw of Sacramento. If such data were released, health plans would be able to manipulate groups during contract negotiations, he said.

“Privately owned groups have a right to keep their detailed financial information private,” Whitelaw said.

Despite Whitelaw’s insistence that the medical association was only objecting to disclosure, the judge ruled that the information could not even be collected. Attorneys for the Department of Managed Health Care had argued that state law prevented the agency from keeping data it collected secret.

Bill’s Intent Called Unclear

In her ruling, Ohanesian said it was not entirely clear what the Legislature intended in 1999 when it passed Senate Bill 260, which regulated medical groups’ financial solvency. The judge said she was swayed, though, by a letter from state Sen. Jackie Speier (D-Hillsborough), which supported the California Medical Assn.’s position.

“It flew in the face of what we were trying to do,” Speier said Tuesday, explaining that the bill’s purpose was to give regulators the tools to help medical groups, not to expose their weaknesses publicly.

Over the last few years, physician group failures have disrupted care and caused confusion for millions of patients statewide. In the most publicized of those failures, Anaheim-based KPC Medical Management went bankrupt in November 2000, leaving 250,000 people in Southern California temporarily without medical care.

Data collected by the state last year indicated that the problem has not gone away. Nearly a quarter of California’s physicians groups fell far short of the state’s financial solvency requirements in the first months of 2001.

Consumer Groups Condemn Ruling

Zingale has said on several occasions that he can’t understand opposition to public disclosure given the high-profile collapse of several medical groups in the state. If doctors see that their group is having problems, perhaps they will take more aggressive steps to shore up its financial health, he said.

Consumer groups condemned the ruling, saying that if medical groups want to take on financial risk like insurers, then they are obligated to prove that they can handle it.

“The decision guts the law that protects consumers from failing medical groups,” said Anthony Wright, a spokesman for Health Access, an umbrella organization in Sacramento promoting health-care reform.

Insurance industry representatives agreed that the state needs to review information on medical group finances to protect the public. “It’s hard to see how it can carry out the function of consumer protection and early warning about financial difficulty in medical groups if it can’t collect information from them,” said Walter Zelman, president of the California Assn. of Health Plans.

The 21-month-old Department of Managed Health Care has lost several lawsuits that challenged its authority over the managed care industry. In January, a judge in Sacramento ruled that the agency could not force Blue Shield of California to provide a weight-loss drug to an obese member. In July 2001, another judge said the state could not require Kaiser Permanente to cover Viagra or other sexual-dysfunction drugs.