HMO Regulator Getting High Marks Alter First Year.

When the state Department or Managed Health Care began operations a year ago as the first HMO regulatory body in the nation, it was given what many believed was a nearly impossible and contradictory task.

As the linchpin of the state's HMO reform effort, it was charged with regulating an industry that had to be dragged kicking and screaming to the bargaining table while at the same time trying to staunch a growing consumer revolt against HMO practices.

A year later, the department and its director, Daniel Zingale, have scored relatively high marks from several of the major players in the HMO debate, including the HMO industry itself, consumer groups, a major business purchasing organization and one of the principal authors of the legislation creating the agency.

"The department has done an exceptional job at establishing itself as credible with consumers, health plans and purchasers," said Peter Lee, president of the Pacific Business Group on Health, the state's largest coalition of health plan purchasers. "It's walked a tightrope of being a strong but balanced regulator that has demonstrated a willingness to listen to all sides."

That's not to say the department and Zingale have no critics. Consumer groups say the department has been slow to move beyond the narrowest interpretation of its mandate to regulate HMOs and has not moved quickly enough to hone in on major problems like the fiscal solvency of medical groups and other health providers.

The HMO industry says just the opposite: that the department is straying too far afield from its original mandate and taking on too much responsibility in areas like requiring speedy payments to emergency room doctors or auditing the health plans themselves. The health plans fear the department may become overburdened, slowing down its ability to respond to the needs of the industry.

Nonetheless, both sides agree that the department is doing a good job in setting up the basic nuts and bolts of regulating HOMs.

"They are speeding through the resolution of grievances and trying to educate the public on their rights in dealing with HMOs, and both of those are big steps," said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights and its health care arm, Consumers for Quality Care.

In fact, department director Zingale calls the focus on getting patients the care they need as the department's most significant accomplishment to date.

"People used to hit a brick wall with no place to turn when they were denied care they believed was necessary," Zingale said. "Now, there is someplace they can go to get the assistance in getting the care they believe they are entitled to."

Zingale said the department receives some 15,000 calls a month from patients who believe they have been denied necessary treatment. The department's patient advocacy office handles most of those calls, making sure that the patient gets the care he or she needs. "Usually, a quick call from us and the problem is resolved," he said.

Sometimes, though, the HMO sticks to its guns and says the treatment is not necessary. If, after a formal grievance proceeding, the HMO still denies treatment, the case goes to an independent medical review panel within the department.

To date, Zingale said, only about 200 cases have gone before the independent review panel. About 60 percent of those have been resolved in favor of the HMOs, with the other 40 percent requiring the health plan to pay for the procedure or medication in question.

In the six months since, the independent review process was formally launched, no lawsuits have been filed, a fact consumer advocates use to counter critics who say giving patients the right to sue will lead to rampant litigation. However, all sides in the HMO regulation debate said they expect some lawsuits to be filed in coming months.

However, consumer advocates like Court say a crucial problem still remains: the need to limit the requirement for patients to submit to a binding arbitration process. While the solution is legislative (state Sen. Martha Escutia, D-Montebello is carrying the bill), Court faults Zingale and his department staff for not backing the legislation.

Zingale said his top priority is making sure the patients that come to his department seeking help get the care they need in the speediest way possible and not to get caught up in the dispute over arbitration or the right to sue.

Along those lines, Zingale said he fears that as word continues to spread about the department, staff will be swamped with too many calls from patients seeking to reverse HMO decisions on providing treatment.

"We are not set up to handle tens of thousands of calls a month," Zingale said, noting that the department's $32 million budget is funded entirely by an assessment on health plans. "Since they are already paying for it, this is something the health plans themselves need to do, using ours as a model. We should not be the customer service center for 20 million HMO enrollees."

Meanwhile, the department has had to step into the breach in another area: the fiscal solvency of health care providers. Within weeks after starting operations, two major providers closed their doors, MedPartners and KPC Management, leaving hundreds of doctors and hundreds of thousands of patients in the lurch.

Most of the patients were diverted to other providers and those that weren't immediately shifted turned to the department for help.

"There's no question that the health plans didn't do a great job of letting people know where they should go," Zingale said.

But the provider failures pointed up a glaring shortcoming in the department's regulatory efforts: it had no financial information on the health plans and providers it was tasked with overseeing.

"The financial operations of some of these providers have been abysmal. I mean look at what happened in the KPC case: they didn't have enough resources to return x-rays and mammograms, yet one of the principals found enough money to pay himself $5 million," Zingale said. "We're now in the process of figuring out what financial information can and should be disclosed to the state."

The HMO lobby and the California Medical Association have so far resisted the department's attempts to access their members' financial records. Walter Zelman, president and chief executive of the California Association of Health Plans, said that this was one of the areas where the department may be overstepping its bounds and overextending itself.

That's not how one of the lawmakers who created the Department of Managed Health Care sees it.

"This is a really major problem and this is the one area I believe the department has been slow to address," said former state Assemblyman Martin Gallegos, who chaired the Assembly Health Committee back in 1999 when the key HMO reform legislation passed that created the department. "Fiscal solvency should be a top priority and must be dealt with quickly, or we're going to see many more KPC's out there," he said, referring to the KPC Management failure.