June 30, 2000
Department of Managed Care
980 9th Street Ste 2450
Sacramento, CA 95814
Be Humble As A Servant & Arrogant As A Champion
Congratulations. Tomorrow, when the Department of Managed Care becomes the new HMO regulator in California, you will have the opportunity to fulfill the long-deferred hopes of millions of California patients who have not ever had the ability to turn to an effective regulator for assistance with their HMO.
On your shoulders are the lives and health of millions of individuals. Their very existence can be threatened by HMO corporations that often care much less about those individuals’ lives than about how decisively your Department will respond to violations of the spirit and letter of the law.
Most patients in California today have no meaningful legal remedy against an HMO in court. Your office is essentially the sole protector of public safety at California HMOs.
This is an awesome responsibility and one that must be met with the humbleness of a servant and the arrogance of a champion. Every patient must have your ear. No abuse should go unpunished.
Every patient that enters any aspect of any California HMO’s medical care delivery system is in your protectorate, Daniel. This must be how you confront your new responsibilities. There can be no passing of the buck to other Departments as there has been under past administrations. If an HMO has a role, then you must be the patient’s protector.
o Immediately, you must accept that abuses at physicians’ groups which receive capitated rates from HMOs are your responsibility. If an HMO’s contractual arrangement passes financial risk for a patient’s care from the HMO to a physicians’ group, then that physicians’ group is your responsibility. The group is arranging for the patient’s treatment as an agent of the HMO under the Knox Keene Act, which you are responsible for enforcing. Your jurisdiction should include any hospital or physicians’ group, with or without a Knox Keene license, which arranges for the delivery of medical care as an agent of an HMO.
o HMOs should not be allowed to pay hospitals and physician groups capitated rates if those rates are insufficient to assure the adequate arrangement of medical services.
o Requirements under the Knox Keene Act that administrative costs by an HMO not exceed 15% of the HMO’s premium cost (Health Safety Code1378, California Code of Regulations 1300.78) should be interpreted to include HMO profits, which are, in fact, an administrative and overhead cost. The reason profits were not mentioned specifically in the code is because when the Knox Keene Act was enacted all the HMOs in the state were not-for-profit entities. The spirit of the law should include profits and protect the 85% of the premium dollar that was supposed to be reserved for medical care delivery, not overhead costs and profit.
These are vital perspectives for you to accept from the start of your administration. We will forward more suggestions in the coming weeks, as well as officially petition for any item you chose not to adopt voluntarily.
Good luck with this extraordinary responsibility. Please call if we can help.
(310) 392-0522 ext.327