Proposed HMO regulations ignite fire in Alabama
Physician-prompted changes add mandates
Alabama HMOs likely will be subject to stricter regulations governing notification of coverage decisions and explanations of denials, thanks to regulations proposed by the state’s Department of Public Health, which shares a governance role over HMOs with the state’s insurance department.
The proposed regulations are lauded by a group representing Alabama physicians as necessary to reflect marketplace changes, although an HMO industry group has expressed concerns about the regulations’ financial feasibility.
"The current [HMO industry] regulations went back to 1987. A lot has changed in the industry since then," says Cary Kuhlman, executive director of the Medical Association of Alabama in Montgomery. "One of the things we wanted to try to understand better was in the case of withholds. Currently, the way some of the HMOs operated was [in a] black box. Physicians didn’t really understand if they received a withhold [payment] what the payment represented, what it was based upon."
Issues such as this prompted the medical association to appoint a third-party task force to suggest changes to the Department of Public Health. The task force carried considerable clout because 12 association officials are members of a committee on public health, which oversees the Department of Public Health’s operations.
The letter led to some proposed changes, which have since been modified and were in the process of being finalized as Physician’s Managed Care Report went to press. Once finalized, the regulations would require approval by the health department’s board, followed by a required approval by a state legislative committee. The proposed regulations would take effect in March if adopted, says Ray Sherer, director of the division of managed care compliance for the Department of Public Health.
The modified proposal will likely include:
• a requirement for HMOs to make withhold payments within six months and explain to physicians how the amount was calculated, or send out a letter within that time period explaining why the withhold payment is not being made and when to expect a payment;
• a rule requiring HMO utilization management officials to make utilization decisions within seven calendar days from receiving the necessary information from an attending physician, "unless the attending physician indicates that the enrollee’s life, health or ability to regain maximum function could be seriously jeopardized"
• a "prudent layperson" definition that establishes a condition for emergency care without getting approval for treatment from a consumer’s HMO;
• rules that define the various stages of member inquiries, ranging from a simple question on policy to a more formal complaint.
An executive with a state HMO association declined to comment on the proposal for Physician’s Managed Care Report. "Discussions are still going on related to these issues, and until we see what the board is called to vote on, it’s not appropriate to comment," says Byron McCain, executive director of the Alabama Association of HMOs. McCain had not been informed of the content of the final proposal when contacted. He did say medical malpractice liability among HMOs constituted a major sticking point. A reference addressing medical malpractice insurance in the health department’s original proposal was eliminated as the proposal was modified because "staff had inadvertently included references to authorizations for care . . . [and] whether a [health plan] medical director was practicing medicine or not," Sherer says.
McCain was quoted in American Medical News, published by the Chicago-based American Medical Association, as saying the original provisions could cost the state’s HMO industry $14 million a year and could "have the potential of driving the industry out of business."1
The proposal represents a major step for Alabama physicians, says Nancy McConnell, president of Gates Moore & Co., an Atlanta consulting firm that advises physician practices. "Historically, most doctors in Alabama outside Birmingham felt managed care wasn’t coming," she explains. "They didn’t feel like they needed to do anything."
But trends occurring over the last year have forced them to take notice, she adds. One specific action was a step taken by Blue Cross Blue Shield of Alabama — which represents about 70% of the state’s insurance market — to limit physician participation in its preferred provider network. Traditionally, physician enrollment in this program was virtually unlimited, provided a physician met certain qualifications.
However, in 1998 the carrier decided to put a cap on physician network participation in markets where it was determined that the existing provider panel was large enough. Even if a new physician joins a practice that participates in the Blue Cross Blue Shield network, he or she is out of luck if the provider network in the market in question has been deemed at capacity by the carrier, McConnell says.
Reference
1. Page L. Alabama HMOs say new rules will put them out of business. American Medical News 1998; 41:15.
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