After considering voluminous comments from physicians around the state and the California Medical Association, the California Department of Managed Health Care plans to pilot an independent dispute resolution process early this year. The voluntary pilot is designed to help healthcare providers and payers resolve payment disputes for out-of-network emergency care services.

"The independent dispute resolution pilot will be for noncontracted healthcare providers and payers that are enrolled in HMOs," says Denise Schmidt, spokesperson for the DMHC. "It will be a voluntary project that will last for six months. Physicians will file payment disputes with the department, which will forward them to an independent arbitrator, a Florida-based practice management company called Maximus. This company will utilize a baseball arbitration style to resolve disputes."

In most cases, the arbitrator will render decisions within 60 to 90 days, according to Schmidt. A stakeholder advisory board will oversee the pilot and recommend changes as needed. Physicians will be charged a fee for filing payment disputes as well.

Although CMA policy supports testing an independent dispute resolution process, the organization has concerns about how the department plans to conduct the pilot. In a letter to DMHC Director Cindy Ehnes on Nov. 13, CMA President Anmol Mahal, MD, and Joe Dunn, CEO of the CMA, objected to: the selection of Maximus as the pilot arbitrator; the pilot's utilization of the Gould criteria, which establishes whether a physician's fee is reasonable; and the pilot's costs.

CMA leaders report that Maximus is operating a similar dispute resolution project in Florida that is failing. Florida billing companies tell the association that Maximus' system has led to a substantial delay in fair payment and an increase in lawsuits and has resulted in healthcare providers being forced to accept deeply discounted rates.

Association leaders say the DMHC is allowing Maximus to modify the Gould criteria as it sees fit. The letter states: "...the proposed pilot inappropriately adds to the Gould criteria a vastly overbroad additional criterion--essentially giving Maximus the authority to consider any other criteria it deems appropriate. This vast expansion of the Gould criteria is wholly inconsistent with California law and the Department lacks the authority to expand it."

Finally, CMA officials say the pilot contains troubling cost-prohibitive provisions that will discourage physicians from participating. Officials say that physicians' ability to aggregate claims is limited by the number of payers and the variety of disputed payment issues, thus preventing physicians from minimizing the costs of underpaid claims.

Discussion of a dispute resolution pilot arose this past August after Gov. Arnold Schwarzenegger proposed regulations that would ban noncontracted physicians from billing insured patients for emergency care services, also known as balance billing. A month later, the DMHC held public hearings in Burbank, San Diego and Sacramento, giving physicians and patient advocates an opportunity to testify on the rules.

The DMHC was scheduled to publish its revised regulations in November 2006, but no formal response has been issued yet. At press time, the CMA and the DMHC were still in discussions regarding concerns about the pilot program.