Regulators//mike1st/mark2nd

By REBECCA KUZINS

Contributing Reporter

If the quality of health care were determined by the number of agencies regulating the industry, Los Angeles would have one of finest medical care systems in the world. More than a dozen government offices federal, state and local oversee everything from licensing hospitals and physicians to safeguarding the cleanliness of your local hamburger joint.

But instead of ensuring that consumers receive top-quality health care, the patchwork of regulatory agencies is riddled with holes that corporations and lawyers can easily slip through.

The weaknesses of the regulatory system became evident in March, when the state Department of Corporations took over MedPartners Provider Network Inc. and placed the ailing company under Chapter 11 bankruptcy protection. MedPartners, an independent practice association, negotiates contracts with managed care companies for 1,000 doctors who provide medical care to 1.3 million Californians.

It may have been able to duck under the eye of regulators because its parent company, MedPartners Inc., is located in Birmingham, Ala. not exactly the Department of Corporations' jurisdiction. The provider network had no administrative employees within the state and all bills were paid from its corporate headquarters.

In the wake of the MedPartners debacle, public pressure has intensified for stronger regulation of the health care industry.

Just about everyone associated with health care agrees that the Department of Corporations has done a poor job of regulating the industry. Gov. Gray Davis has promised to transfer managed care enforcement out of that department; lawmakers and lobbyists are debating numerous proposals aimed at placing regulatory responsibility for HMOs and possibly other types of health care companies in a new agency.

Consolidating oversight responsibilities into a single agency could simplify the current regulatory quagmire. But health care regulation will remain complex because the nature of the industry is complex. Far from a monolithic structure, health care is comprised of physicians, nurses, technicians, hospitals, nursing homes, HMOs, indemnity insurers, and myriad other people and institutions.

The current enforcement scheme has evolved over time and with the participation of the very people and institutions it seeks to regulate and many of those parties are at least as interested in retaining their respective positions as they are in seeking regulatory reform.

"It's a turf war," said Ron Kaldor, a Sacramento-based health care lawyer. "Doctors and hospitals want separate agencies to regulate them. Regulation has always been done a certain way, and doctors and hospitals are worried about the changes. Creating one agency to regulate both doctors and hospitals would be a major structural change. And in the current political environment, you're not only talking about regulating physicians, but podiatrists and other practitioners. Each one has its own ax to grind, its own lobbyist, its own turf."

Shannon Sutherland, a lobbyist for the California Nurses Association, expressed similar concern about the prospect of having one agency license and discipline all health care professionals, instead of separate agencies to regulate each profession. (Registered nurses in California are currently licensed and disciplined by the Board of Registered Nursing.)

"The professions are so distinct," said Sutherland. "One recommendation could be to have one big licensing agency, with a sub-agency for each profession. But if all the revenue for enforcement is placed in one pool, one profession's regulatory activity could drain revenue away from the other professions. Why would registered nurses want to support enforcement against doctors?"

Jim Lott, executive vice president of the Healthcare Association of Southern California, said that having one regulatory agency overseeing all health care companies could create a conflict of interest.

"The state of California, through the Medi-Cal program, contracts with HMOs to purchase medical services for welfare beneficiaries," explained Lott, whose organization represents hospitals and primary-care physicians' groups. "Any state agency (that regulates HMOs) should have nothing at all to do with the Medi-Cal program or any other state program that contracts with HMOs to purchase medical services."

Lott said one solution might be to shift HMO regulation over to the Department of Insurance, which already oversees health insurers. "There's no reason in the world why it couldn't become the agency in charge instead of the Department of Corporations," he said.

Assemblyman Martin Gallegos, D-El Monte, chairman of the Assembly Health Committee, said the state has created numerous regulatory agencies because different agencies are needed to enforce different laws.

"Providers are overseen by the Business and Professions Code. Health plans are under the Health and Safety Code. It's difficult to bring the two under one umbrella because they are covered by separate areas of law," he said.

Nonetheless, Gallegos has introduced legislation that seeks to streamline the regulation of managed care. AB 78 would get the Department of Corporations and Department of Insurance out of the managed care enforcement business by transferring their oversight responsibilities to a new, as-yet-unspecified managed care regulator. The bill also requires that the new regulator report to the governor and Legislature on whether its enforcement jurisdiction should be expanded to include medical groups and independent practice associations.

Not surprisingly, AB 78 is being criticized by some industry lobbyists as too bold and dramatic.

The California Medical Association, the powerful lobbying organization for the state's physicians, is pushing for the alternative SB 420, which would create a new department within the state Health and Human Services Agency to assume the health plan enforcement responsibilities that currently belong to the Department of Corporations.

"SB 420 is very specific," said Norman Plotkin, a physician lobbyist who helped draft the bill. Plotkin added that SB 420 purposely excludes any provisions for regulating medical groups, or for getting the Department of Insurance out of the health care enforcement business.

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