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Jun 08, 2005 - 05:00 PM

Outsourcing HMO Oversight

by Jerry Flanagan
Though Arnold's California Performance Review (CPR) plan to gut consumer protection rules was pulled back in the wake of broad criticism, one of its proposals was revived today at a hearing convened by the Department of Managed Health Care, the state's lead HMO regulator. The gov's recommendation would cede the state's HMO audit authority to a private company rooted in the industry.

In the past, the state's audit authority allowed investigators to uncover that Kaiser Permanente had given telephone clerks the "authority to overrule physician decisions." This finding led the state auditors to conclude that medical decisions at Kaiser could not be "independent of fiscal and administrative considerations" and require Kaiser to justify care denials.

The company slated to take over the role of auditor, the National Committee for Quality Assurance (NCQA), was founded and funded in 1979 by two HMO industry associations looking to duck federal and state oversight. Though the NCQA has tried to legitimize itself in recent years by diversifying its funding (it is now heavily subsidized by the drug industry), we can be sure that NCQA won't recommend timely state takeovers of financially unstable and fraudulent HMOs like past regulators have done.

HMOs clearly see a benefit in having an old ally as overseer. In fact, according to Arnold's CPR report, audit out-sourcing was recommended by several HMO powerhouses and the industry's lead California lobbying association including: WellPoint, Health Net, Molina and the California
Association of Health Plans.

In return for the over $500K in campaign contributions from HMOs, Arnold wants to pull the HMO cop off the beat.

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