CCEMHC SPONSORS CONFIDENTIALITY BILL
CCEMHC is proud this year to sponsor our first piece of managed care regulatory
legislation. With the California Society for Clinical Social Work as co-sponsor, we have
introduced AB 2648, concerning managed care records audits and patient confidentiality.
Assembly Member Michael Machado, from the Stockton area, is authoring the bill. Currently
it has been amended to specifically address the audits, and the legislative counsel is
reviewing the changes. We expect to have our first committee hearing in two weeks. Special
thanks to Jim Barrick, Ph.D., Joline Lyons, LCSW, and Ruth Clifford, Ph.D., for their
contributions to the ideas in the bill and visits to legislators.
This latest version of the bill establishes several protections of patients' privacy
when HMOs and PPOs conduct routine inspections of mental health records kept by their
contracted providers. These protections include:
-- Records made available for audits shall not include identifying information in the
form of the patient's name, address or social security number. Plans may assign an
internal authorization code for the purpose of tracking a specific individual's
-- Patients must give their informed written consent to allow plans access to their
information for purposes other than determining medical necessity. The consent form must
be specific regarding the nature, extent and purpose of the request. It must be printed in
a typeface no smaller than 14 point type and conform with the requirements for release
forms of individual practitioners.
-- Patients shall have the right to refuse to release their records for purposes other
than determining the medical necessity of their care, without jeopardizing their benefits.
OTHER STATE LEGISLATION ON CONFIDENTIALITY
Several other bills have been introduced this year dealing with confidentiality of
medical records in general. The expansion of managed care information gathering,
telemedicine, and computerization of health care data have created the need to update
state laws protecting patient privacy.
Our bill complements SB 2035, the other mental health confidentiality bill in the
legislature this year. This bill, sponsored by the California Psychological Association
and authored by Senator Steve Peace, is a slight revision of last year's SB 1062, which
was vetoed by the governor. It limits the information which may be disclosed to only the
patient's name, diagnosis, date and type of service provided, a brief treatment summary
including interventions used and progress made, and lab test results. A written consent
form must be signed by the patient, but having once done so, the patient will have
automatically consented to release of information for future reviews of records. Refusal
to sign a release may result in denial of payment for services. CCEMHC would not go so far
in giving managed care such freedom to use patients' information.
Senator Tim Leslie's bill, SB 1382, covers a wide scope of confidentiality issues and
contains many improvements over existing laws, such as requiring more specificity on
release forms of insurers and managed care companies. It restricts disclosures by
providers about patients to the minimum necessary for the purpose, a principle that
appears in several other bills and one whichCCEMHC supports. The bill establishes
administrative, civil and criminal penalties for violations.
Senator Herschel Rosenthal has introduced SB 379, which allows health plans and their
contracted providers and medical groups to request enrollees to sign releases of their
medical information only for purposes directly related to the provision of services to
that enrollee. This is a strong bill, which increases the limits on the amount of punitive
damages and attorney's fees in cases of violations of its provisions. Currently, when
patients can prove the improper release or use of their medical information, they are only
entitled to $3,000 in punitive damages and $1,000 (!) for attorney's fees. Under this
bill, those awards would be increased to $300,000 punitive damages and reasonable
attorney's fees as set by the court.
AB 1644 has been introduced by Assembly Member Liz Figueroa. According to this bill,
health plans must be bound by existing confidentiality rules. When people enroll in a
plan, they will then be presumed to have given their consent for the plan to use their
medical information for purposes of diagnosis, treatment, and necessary administrative
purposes. CCEMHC is concerned that the term "necessary administrative purposes"
is not defined in the bill. Managed care practitioners are accustomed to seeing plans give
all kinds of justifications for requiring patient data that do not match the type and
extent of the data specified. We also do not agree that enrollment, per se, in a health
plan should automatically entitle the plan to use medical information in any way it sees
fit. Especially when enrollees are not given any other choice of company or type of plan,
as is often the case, this bill (which closely resembles the status quo) places all the
power in the hands of the health plans at the expense of consumers.
POINT OF SERVICE BILL INTRODUCED
Assemblyman Martin Gallegos is the author of a new bill, AB 2638, sponsored by the
California Psychological Association, requiring health plans to offer subscribers coverage
for services from licensed providers of their choice, whether in or out of network. The
premiums for these "point of service" (POS) plans and the co-payments for
services from providers outside the network would be slightly higher. Several other
states, including Oregon, Minnesota and Virginia, already have similar laws. In
California, POS plans are currently permissible but not required.
POS is particularly important in the field of mental health because many Californians
enrolled in health plans need or prefer therapists and caregivers who are not in their
plan. Some providers refuse to contract with managed care for various reasons, including
excessive administrative demands, inadequate compensation and unethical practices. Some
cancel their contracts themselves, or are terminated by plans that are reducing the size
of their panels, pulling out of business in a geographical area, or cutting out providers
who advocate too strongly for patients. Plans may have contracts with only a small number
of providers, none of whom meets the particular needs of a client or patient.
A POS requirement means more choice for patients and clients, less disruptions in the
continuity of care, and a more realistic chance for practitioners to elect not to sign
managed care contracts. For these reasons, CCEMHC strongly endorses this bill.
In its current form, the bill applies to all HMOs and PPOs, individual or group
accident or health plans, but not to self-insured plans. The latter are outside the
jurisdiction of state laws due to the federal ERISA law.
Under the bill, plans must cover out-of-network services to the same extent as
in-network services. The patient's co-payment may not be more than 20% more for
out-of-network than for in-network services.
WILL MANAGED CARE USE PARITY LAWS TO CURTAIL
CCEMHC has supported passage of the mental health parity bill in California (AB 1100).
However, we are concerned about the bill's language which has been tightened up to define
a closed list of disorders as "biologically based severe mental illnesses."
Those disorders are major depression, bipolar disorder, panic disorder,
obsessive-compulsive disorder, most psychoses, autism, and developmental delays in
children. If this viewpoint becomes law, will managed care companies take advantage of
this statutory authority to restrict psychosocial treatments in favor of medication?
The concern has some basis in reality. Oxford Health Plans, a major managed care
corporation on the East Coast, recently responded to such a mental health parity bill
passed in Connecticut, by notifying its behavioral health providers of a new policy. For
the disorders listed in the law, the company has declared, the foundation of treatment
must be biological. All patients' care must be overseen by psychiatrists, who will
stabilize them on medications and decide whether any short-term, episodic psychotherapy
should also be offered.
Prompted by developments such as the one in Connecticut, CCEMHC has communicated our
concern to legislators, asking them to amend AB 1100 to make clear that it is not intended
to be used by managed care to eliminate effective nonbiological treatments for the
mentally ill, or to deny services to patients and clients with disorders not listed.
Further, they ask that the bill be clear that it does not intend to interfere with the
current scope of practice of each of California's mental health professions.
BEING RUN THROUGH THE MAZE OF MY HMO By Carrie
In March of 1995, I consulted with the primary care physician at my HMO regarding
feelings of stress and despair about a situation at my job. He offered me free samples of
Paxil. Two days later I returned to him. We were both horrified by my condition. The day
before, I had reached my breaking point at work and walked off the job in the middle of
the day. Three hours later I began jerking spasmodically. In earlier times, one might have
guessed me to be possessed by a demon!
But even in these modern times of managed care, my doctor wrote me a prescription for
Ativan and referred me to a psychologist. The Ativan put me to sleep. The referral woke me
up with hope that I would imminently find relief in my crisis.
Within a week I went for my initial appointment with a most wonderful female
psychologist who took me seriously and validated my need for immediate crisis
intervention. But unfortunately, she could not continue to see me because her contract
with my HMO would be ending in just two weeks. The only reason she gave for her leaving
was "restructuring of their referral process."
Sad and jerking, I returned to my PCP for a second referral. I was told I would need to
wait. I did. I waited and jerked, continuing in a downhill spiral which resulted, after
four weeks, in an incredible new phenomenon: I started to stutter! Not a subtle stammer,
but a blatant glottal attack every few words. This was devastating to a person whose
profession involved speaking with authority to rooms full of people.
My jerking became more and more extreme. Two months went by. I was unable to return to
work, after a successful career of more than twenty years. Sharing my despair, my spouse
began waking in the night and crying over my sleeping body. Finally, he insisted that we
find counseling immediately, with or without my HMO's help. I did have secondary
insurance, a PPO, through his employer. Within days, my husband had arranged an
appointment with a psychologist, who believed I needed the attention of a therapist with
an M.D. and made me an immediate evening appointment with a psychiatrist. He accurately
diagnosed me as having Post-traumatic Stress Disorder from situational trauma, with
conversion to myoclonic motor jerking and subsequent speech disorder. We began treatment
forthwith, obtaining authorization from the PPO, which pays 50% of the fee.
Shortly after I began working with this psychiatrist, I received two phone calls from
my HMO's new referral service for mental health counseling. During both calls I was asked
to explain my situation to complete strangers whose job it was to assign me to an
HMO-contracted therapist. This process was especially humiliating for me because of my
speech problem, which now included a distinct slurring!
Three months after I first asked my PCP for a referral, I received a call from a
contracted female psychologist. She and I both agreed that at this point, I would do
better to continue with the psychiatrist.
I then appealed to my HMO to cover the remaining 50% of my counseling costs with an
out-of-network provider. What was their response? The HMO did nothing! They did not
respond to one single letter. I attempted phoning them but received an incredible verbal
run-around. Even my self-possessed, business-professor husband couldn't get straight
Finally I contacted the Health Rights Hotline in Sacramento, who put me in contact with
the Department of Corporations. Upon filing the Request for Assistance with the DOC, I
immediately began receiving very sweet letters from my HMO. However, in October, 1997,
they denied my appeal anyway, twenty months after the appeal was formally filed.
My therapy is continuing, three years after I became ill. I am 100% disabled from being
able to work, still jerking and stuttering, but am gradually improving.
I believe my HMO interfered in my obtaining timely mental health treatment, causing my
condition to unnecessarily worsen, prolonging my suffering and that of my family, and
incurring additional costs for them and for me for tests and treatment. Now I am pursuing
redress through the courts. As I wrote my HMO, I will never stop caring or writing or
speaking about the mistreatment I received.
CONSUMER PROTECTION COMMITTEE HEARING ON MEDICAL
On February 20, the Assembly Consumer Protection Committee held hearings in San Diego
on issues about medical privacy in the context of managed care and computerization of
patient records. Ruth Clifford spoke as part of a panel of privacy advocates. The
following is an excerpt from her testimony. The full text is available on our web site.
"...I have here a drawing of a person in one of those infamous hospital gowns,
open at the back. I think it depicts the essence of being a health care consumer. When we
talk about access to medical records, we need to keep in mind that this is the
psychological condition of every one of us when we are the recipients of health care. We
are exposed, uneasy, and vulnerable. What is learned about us when we are in this
condition (literally or metaphorically), and what is done with that information, is
fundamental to our sense of personhood and dignity...
Managed care is not the only cause of medical privacy concerns, but it tends to
aggravate existing problems and creates a few new ones. The number of personnel within one
managed care company who have access to all identifiable clinical information can be huge.
Since the patient has signed a general release form for the managed care company, the
company can claim that "confidentiality" exists, but a patient who learns that
so many people have access to his or her information is not much comforted...
Good record-keeping is considered synonymous with good care. Good records are judged by
standards crafted by the National Committee for Quality Assurance (NCQA), which accredits
managed care organizations on a voluntary basis. The NCQA is a private, unregulated body
consisting mainly of representatives of the managed care industry. Its standards do not
reflect the ethical or administrative standards set by the health professions, nor are
they open to consumer input...
Managed care companies, health organizations, the federal government, states and
counties, marketers, and even credit reporting companies are pouring billions of tax and
health care dollars into new computerized systems for tracking personally-identifiable
health care data. All this is occurring in the virtual absence of laws to protect consumer
confidentiality. Data security in computer systems has so far proven to be full of holes,
yet the public is asked to simply trust in wondrous new technologies. We are reminded of a
major lesson from the sinking of the Titanic, of how human beings can glorify technology
and trust it to be perfectly reliable. But if we steam ahead at full throttle into an
iceberg field, we are inviting disaster."
"TERMINATION WITHOUT CAUSE" CLAUSES UNDER
ATTACK by Richard Leslie, Esq.
Reprinted (abridged) from The California Therapist, July/August, 1997, with the
Most therapists who are familiar with managed care contracts are aware that almost all
contracts contain a clause that allows the managed care company to terminate the contract
"without cause." Managed care companies claim that they need to have the
flexibility to adjust the size of panels based upon economic considerations that exist at
any particular time. HMOs want to have the right to reduce the size of their panels to
help them manage the costs and quality of those panels. Terminations for cause, of course,
are permissible. However, health practitioners have a right to expect that they will be
informed of the reasons for such terminations and that they will have an opportunity to
show why the "cause" asserted by the payer is incorrect.
As many are aware, some managed care companies will terminate a provider under the
"no cause" clause in order to avoid the necessity of explaining or justifying
their reasons for deselection of a therapist. Many therapists fear that if their
utilization patterns are not to the satisfaction of the managed care company, they will be
terminated under the "no cause" clause, and will thus be deprived of any chance
to challenge the termination. Now, primarily as a result of two court decisions, it
appears that the pendulum is shifting.
In a 1996 case entitled Harper v. Healthsource of New Hampshire, the New Hampshire
Supreme Court held that, "...the public interest and fundamental fairness demand that
a health maintenance organization's decision to terminate its relationship with a
particular physician provider must comport with the covenant of good faith and fair
dealing and may not be made for a reason that is contrary to public policy..."
In this case, Dr. Harper's ten year relationship with the HMO was terminated
"without cause" even though the termination was based on the recommendation of
Healthsoure's clinical quality assurance committee. Apparently, the termination of Dr.
Harper was actually based upon concerns about his compliance with the plan's practice
guidelines or some related reason ("for cause"), but the plan chose to take the
easy way out. The New Hampshire Supreme Court further held that, "...If a physician's
relationship, however, is terminated without cause, and the physician believes that the
decision to terminate was, in truth, made in bad faith or based upon some factor that
would render the decision contrary to public policy, then the physician is entitled to
review of the decision."
The decision in Harper, which allowed Dr. Harper to learn the specific reasons for his
deselection, represents an important step forward. The court recognized the fact that HMOs
and other payers may be hiding behind the "no cause" clause and deselecting
providers for reasons that may be inappropriate, i.e., providing "too much"
treatment for patients, even though there may be medical necessity for such treatment. Had
the Healthsource agreement between the parties specified the economic criteria which might
trigger deselection based on a small number of enrollees, or the potential that another
qualified physician would be available to provide lower cost services, Dr. Harper would at
least have received the information necessary to understand whether or not his termination
was made in bad faith.
On April 30, 1997, a California court of appeal rendered a decision, in a case entitled
Potvin v. Metropolitan Life Insurance Company, holding that physicians must be allowed
fair procedure before insurance companies can remove them from the insurer's network of
providers, even if the contract allows for a termination without cause. As is so often the
case, although this termination was made pursuant to the "no cause" clause of
the contract, the evidence showed that the insurance company had concerns about the
physician's malpractice history. Even though the physician wrote to the insurance company
and explained that a 1977 case had been settled without an admission of liability and that
other claims of malpractice against him had been dropped, the insurer would not grant a
hearing to the physician and insisted that they were not terminating him "for
As a result of the physician's termination from the plan, he lost a large percentage of
his patients. Additionally, as is sometimes the case when one is terminated from a plan,
he was terminated by other managed care entities and rejected by physician groups. He also
lost referrals from other physicians who were members of defendant's health care provider
The appellate court decision in this case emphasized the fact that California courts
have long recognized a common law right to fair procedure protecting individuals from
exclusion or expulsion from private organizations which control important economic
interests. The decision referred to earlier California court decisions regarding managed
care plans, where it was held that the common law right to fair procedures extends to
health care providers' membership in provider networks because managed care plans control
substantial economic interests. In this particular case, the court noted that Metropolitan
Life controlled substantial economic interests affecting Dr. Potvin, since about fifteen
percent of his patients were insured by Metropolitan. This case may be appealed by
Metropolitan (Ed. note: the case is now being appealed and is expected to be heard this
It is important to note that neither of the two decisions discussed in this article
clearly spell out the extent of the fair hearing or fair procedure requirements that are
necessary in order to pass muster with the court. It is likely, in this writer's opinion,
that the courts will require nothing more than a clear and accurate statement of the
reason for terminating a provider, and the right of the provider to submit a written
response that must be considered by the plan.
While the threat of increased litigation in this area of managed care practice may
compel some plans to re-evaluate these contractual provisions, we should not expect that
the problems created by the "termination without cause" clause will quickly
disappear. Managed care companies will continue to argue that such a clause is necessary
for the smooth and efficient operation of provider panels, and that most plans do not
misuse the clause.
Managed care companies will also argue that the requirement of a fair hearing or
procedure, if applied too widely, will lead to an increase in costs, which will ultimately
have to be paid by the employer. In fact, one managed care representative has asserted
that the attack upon the "without cause termination" clause is a back door
attempt to impose "any willing provider" requirements on health plans.
On a note of caution, it must be remembered that a termination for cause
can create problems for the practitioner vis a vis insurability, hospital privileges, and
utilization by other payers. As the "without cause" clause is used less
frequently, "for cause" terminations may increase. If these terminations are
upheld, after notice and a fair hearing, the negative consequences described above may
follow. The likelihood of increased litigation seems obvious, since practitioners will
claim that the "for cause" termination was made in bad faith, or was capricious,
or was simply not appropriate under the circumstances. MANAGED CARE IN
"What Is the Value of a Voice?" by Linda Peeno, M.D., in U.S. News and World
Report, March 9, 1998, 40 ff. A physician who worked for four years as a medical director
in an HMO describes the pressures to which she was subjected to deny payment for
"The Doctor Is Not In," by Ronald Glasser, M.D., in Harper's Magazine, March,
1998, 35-41. Glasser argues that managed care companies depend on a number of "fairy
tales" to justify their continued existence: "All doctors are rich and
omnipotent," "The operation is unnecessary," "The doctor is a
mechanical device," "The patient loves to go to the hospital," and
"Sickness is the patient's fault, and death is a preventable disease."
"Fighting For Health Care: 'Patients' Rights' Can Curb Unethical Plans, But Your
Coverage Might Still Be Chopped," by Jane Bryant Quinn, in Newsweek, March 30, 1998,
45. This article correctly warns that even if Congress passes the Patient Bill of Rights,
employers could still write contracts with managed care that exclude coverage for certain