With Los Angeles County at the center of a state health care crisis that has physician groups failing as most hospitals operate in the red, the coming year promises a host of initiatives aimed at providing financial relief for medical care providers.

In the wake of a landmark agreement announced last week between the California Medical Association and Aetna USHealthcare that should raise fees for doctors, the CMA plans to ratchet up its pressure on HMOs to raise payments to other physician groups.

Doctors also plan to join hospitals to lobby state government for a comprehensive solution to chronic underfunding of emergency rooms and trauma centers.

At the same time, doctors will find themselves under closer scrutiny as the state's new Department of Managed Care requires audited financial statements of physician groups for the first time.

And hospitals will face tough new requirements for seismic retrofitting as they are obligated to implement costly new federal patient privacy regulations.

The bottom line? Things could get worse before they get better.

"Sixty-four percent of the hospitals in California are operating with negative margins averaging 5.14 percent," said Jim Lott, executive vice president of the Healthcare Association of Southern California, a hospital industry group. "That's red ink, and that's where we're starting from."

Cornerstone issue

The CMA, and its Los Angeles County counterpart, the Los Angeles County Medical Association, have made realistic HMO capitation rates what managed care plans pay each month per patient a cornerstone of their agenda in 2001.

The association made headlines last week when it announced in Los Angeles that it cut a deal to get better rates with Aetna, the nation's largest medical care insurer, though not the largest in California.

Aetna committed to paying "actuarially sound" rates that reflect the actual cost of care as well as at least temporarily assuming the cost of new drugs and technologies that become standards of care but are not included in existing doctors' contracts.

The medical association hopes the deal will become the basis for settling a lawsuit it filed in May against WellPoint Health Networks Inc. and its Blue Cross of California subsidiary, Health Net, and PacifiCare Health Systems, over inadequate capitation rates.

There have been some moves to resolve the complaints, but CMA chief executive officer Jack Lewin said the two sides have a long way to go before they reach a mutual understanding.

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