Featured Health Business Daily Story, Feb. 26, 2013
Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
Displaying the increasingly blurred lines between providers and health plans in the new wave of coordinated care being promoted by HHS, HealthCare Partners has applied to operate a limited form of an insurance plan in California, top company officials said in an earnings conference call on Feb. 14. The application — by the country’s largest operator of medical groups and physician networks, which was purchased late last year by dialysis operator DaVita to form DaVita HealthCare Partners — is not for the purpose of becoming a full-fledged managed care operator, but rather to take advantage of HealthCare Partners’ role in CMS’s Pioneer accountable care organization (ACO) program.
The trend for providers looking to move into the health plan side of a more integrated insurance market is real, market watchers say, but the HealthCare Partners situation revolves around global management issues inside the ACO. The application for a limited Knox-Keene Act license will not make the provider subject to minimum loss ratio (MLR) requirements under the Affordable Care Act, for instance. “According to the state, in order to take full capitation, including institutional, we have to apply and obtain a limited Knox-Keene license. It’s a requirement by the state, but it does not put us in the position where we are a fully licensed insurer. We’re not in the position nor do we plan to be in the position to market and sell directly to employers. It’s just a requirement of the movement to the Pioneer ACO,” said Robert Margolis, DaVita chairman and CEO, in the call.
The Pioneer ACO program is for those organizations and individual providers already active in the coordinated care space. This model has a faster track than the Medicare Shared Savings Program initiative. In the third year of the Pioneer model, organizations that have earned cost savings during the first two years are able to move to a population-based payment arrangement and full risk that can last through a fourth and fifth year.
On the same conference call, Matthew Mazdyasni, DaVita’s chief financial and administrative officer, said the MLR requirements are not applicable “because we’re not receiving premium from payers or employers. It’s a plan-to-plan, so we as a limited Knox-Keene will be contracting with full Knox-Keene plans who are receiving. So those entities are subject to MLR. We are not because we’re not directly receiving from the payer, with exception of Pioneer ACO.”
When asked if the provider plans to seek this limited status in other states, Margolis said the company would do so only if it makes sense because of local market requirements in order to produce the kind of global management that DaVita contends benefits patients and coordinates care. “At this point, we do not intend to become an insurance company, if that’s the question that you’re asking,” he added. Mazdyasni noted that the other two states where HealthCare Partners has Pioneer ACO operations, Nevada and Florida, “do not require any special license because these are Medicare. So it is allowable, without any special license, to receive global capitation from CMMI [the Center for Medicare & Medicaid Innovation], which is part of CMS.”
When the news came out about the HealthCare Partners application, the Los Angeles Times on Feb. 9 questioned whether the company’s move was related to a lawsuit brought by a HealthCare Partners patient alleging the company engaged in unfair and fraudulent business practices. The suit, filed by Juan Carlos Jandres in Los Angeles County Superior Court, alleges that when “Jandres sought care in 2010 for a growth in his mouth” the provider “denied him access to appropriate hospital care because it was trying to avoid hospital claims it was responsible for paying,” the newspaper article said. Jandres, according to the lawsuit, lost most of his jaw to cancer as a result of the lack of proper care. In the story, HealthCare Partners denies the allegations of poor patient care. The California Department of Managed Health Care (DMHC), the same agency to which HealthCare Partners applied for its limited Knox-Keene Act license, has been reviewing the patient’s allegations as well, according to the newspaper.
HPW asked DMHC whether the application and the lawsuit have any relationship to one another, but Gary Baldwin, assistant chief counsel in the Office of Health Plan Oversight for DMHC, says the agency is not a party to the suit and had no further comment. HealthCare Partners denied to the Los Angeles Times any relationship between the lawsuit and the application to DMHC, instead reiterating that the point of the application is to meet provisions of the Pioneer ACO.
Baldwin says the HealthCare Partners application is in the early stages and there is no public information to release. “A typical application review process is approximately six months. However, it can be longer depending on the quality and complexity of the application,” he adds. DMHC oversees 107 plans, of which two offer PPO products. Over the last year, eight of nine applications received were from entities affiliated with a provider, Baldwin says.
Charles (Chuck) Rosen, president and CEO of CPR Insurance & Financial Services and president of the California Association of Health Underwriters, tells HPW that beyond the details of what HealthCare Partners is seeking, the role of providers is definitely shifting in California. He sees opportunities for providers like HealthCare Partners to be miniature versions of Kaiser Permanente. “HealthCare Partners has the electronic medical records system; the primary care physicians are all connected. It would be just like Kaiser,” he says.
As of Sept. 30, 2012, HealthCare Partners served roughly 745,000 managed care patients, including more than 190,000 Medicare Advantage members. It has operations in California, Florida, Nevada and New Mexico.
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