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SB 260 Regulations Summary

On September 9, 2005, SB 260 regulations for data collection, disclosure language, grading/reviewing and corrective action for risk-bearing organizations became effective. The regulations essentially address the following:

  • Provider reporting of specified organizational and financial information to the Department of Managed Health Care;

  • Click here for a list of RBOs and their assigned DMHC identification numbers.

The SB 260 regulations require RBOs to provide certain organizational and financial information to the Department as follows:

  • On a quarterly basis (within 45 days of the end of each quarter, beginning on or after July 1, 2005) a financial survey report in an electronic format to be supplied by the Department containing all of the following:

  • For organizations serving at least 10,000 covered lives under all risk arrangements as of December 31 of the preceding calendar year:

    • Financial survey report (including a balance sheet, an income statement, and a statement of cash flows) prepared in accordance with generally accepted accounting principles (GAAP);

    • A statement as to (i) what percentage of completed claims the organization has timely reimbursed, contested, or denied during the quarter; (ii) whether or not the organization has estimated and documented, on a monthly basis, its liability for incurred but not reported claims; (iii) whether or not the organization has at all times during the quarter maintained positive tangible net equity and positive working capital; (iv) whether or not the organization has, at all times during the quarter, maintained a cash-to-claims ratio.

    For organizations serving less than 10,000 covered lives under all risk arrangements as of December 31 of the preceding calendar year:

    • A statement as to (i) what percentage of completed claims the organization has timely reimbursed, contested, or denied during the quarter; (ii) whether or not the organization has estimated and documented, on a monthly basis, its liability for incurred but not reported claims; (iii) whether or not the organization has at all times during the quarter maintained positive tangible net equity and positive working capital; (iv) whether or not the organization has, at all times during the quarter, maintained a cash-to-claims ratio.

Regardless of the number of covered lives served under all risk arrangements:

  • On an annual basis (within 150 days of the close of the provider organization's fiscal year beginning on or after January 1, 2005 and not more than 150 days after the close of each of the organization's subsequent fiscal years) an annual financial survey report in an electronic format supplied by the Department containing all of the following:

  • A financial survey report, based upon the provider's annual audited financial statements, (including at least a balance sheet, income statement, statement of cash flows and footnote disclosures) prepared in accordance with GAAP;

  • Financial survey report on a combined basis with an affiliate if the organization or such affiliate is legally or financially responsible for the payment of the organization's claims;

  • A statement as to (i) whether or not the organization has estimated and documented its liability for incurred but not reported claims; (ii) whether or not the organization has at all times during the year maintained positive tangible net equity and positive working capital; (iii) whether or not the organization has at all times during the year maintained a cash-to-claims ratio; (iv) the organization maintains reinsurance and/or professional stop-loss coverage; (v) copy of the complete annual audited financial statement, including footnotes and the certificate or opinion of the independent certified public accountant.

A "Statement of Organization Survey" which details various characteristics of the organization including, but not limited to its name and address, contact information, list of health plans with which the organization maintains risk arrangements; organizational structure; number of enrollees, basic geographic area served, and number of physicians.



Risk-Bearing Organizations - Financial Reporting Results

Understanding the Summary Information

The Quarterly Survey results for the period October 1, 2005 to December 31, 2005 represent the second quarter that Risk Bearing Organizations ('RBOs') were required to submit financial data to the Department of Managed Health Care ('Department') under the revised SB 260 regulations. The financial disclosures are all self-reported information.

RBOs are compensated on a preset monthly amount of money for each health plan member for whom they have agreed to provide health care services, rather than the amount of health care services the organizations actually provide. This type of compensation arrangement is known as capitation. Capitation arrangements, as well as other factors, may result in a single Quarterly Financial Survey submission that does not necessarily reflect the overall long-term viability of an RBO. Quarterly submissions reflect a snap shot of the RBO at the end of the reporting period. These submissions are not necessarily designed to equalize or average seasonal fluctuations in patient services or expenses.

When the Annual Audited Financial Statements are submitted to the Department, a more complete picture of each RBO's overall financial viability should emerge. In addition, as additional quarterly filings are reported, RBO's compliance with the financial solvency criteria can be trended to provide better insight into the organization's long-term financial viability. To assist consumers in understanding the significance of the quarterly survey results for the period October 1, 2005 to December 31, 2005, the Department has prepared some aggregated compliance information.

The quarterly survey results are not intended to suggest that an RBO that fails to meet all of the solvency criteria is necessarily on the verge of bankruptcy or likely to cease providing their patients with health care services. Consumers should consider these results as a starting point for understanding the financial viability of medical providers who have entered into risk arrangements with health plans to provide health care services for members of managed care programs.

RBOs reporting deficiencies in any of the four grading criteria (five grading criteria, effective 1/1/06) are required to implement, with the agreement of their contracting health plans and the approval of the Department, a "Corrective Action Plan" ('CAP') to remedy these deficiencies so that the organization is compliant with SB 260. The Department and the contracting health plans will monitor the progress of RBOs in meeting the terms and representations contained in their Corrective Action Plans.


Map and County Breakdown

View the seven regions for financial and comparative purposes:
Map and County Breakdown


Individual Risk-Bearing Organization Results

The chart lists the RBO (provider identification number, name, region, county and reporting period) and whether the RBO has 'met' or 'not met' the four grading criteria (maintained positive working capital at all times; maintained positive TNE at all times; calculated and documented IBNR; and reimbursed, contested or denied at least 95 percent of its claims within 45 working days). In addition, the Relative Working Capital and TNE ratios are calculated (by the Department) for each RBO.

Financial Surveys Received for the following periods:

The RBOs that serve less than 10,000 covered lives under all risk arrangements as of December 31 of the preceding calendar year are required to file disclosure statements indicating if they have met or not met the Grading Criteria (listed above). Based on the information submitted, the Department can require the RBO to file Quarterly Survey Reports for additional information about the RBOs financial status.

The chart below contains the self-reported information from the disclosure statements ('Compliance Statements') received for RBOs with less than 10,000 lives. It summarizes whether the RBO has 'met' or 'not met' the Grading Criteria and if the RBO was provided written notice to file Quarterly Survey Reports to the Department.

Compliance Statements Received for the following periods:

The chart lists RBOs that have not filed either a Compliance Statement or a Quarterly Survey.

List of Non-Filing RBO's for the following periods:


Summary of Comparative Aggregated Data

The information below allows consumers to assess summarized information on a statewide and region basis.

Summary of Comparative Aggregated Data for the following periods:



Plan Reporting to Department

On August 31, 2001, the Department of Managed Health Care's proposed regulations implementing the first phase of SB 260 (Speier-1999) became effective. The regulations require plans to provide certain information to the Department related to the risk a plan has assigned to its provider network, including the following:

  • On a quarterly basis (within 45 days of the end of each calendar quarter, beginning with the first quarter of 2001), the name and address of each risk-bearing organization a plan contracts with, plus the number of enrollees assigned to the organization.


  • On an annual basis (within 45 days of the end of the first calendar quarter), a matrix which details, for each of the plan's provider organizations, the risk arrangement between the plan and provider by major expense category (i.e., primary care, radiology, pharmacy, etc.).

Plan Reporting to Providers

The regulations require that plans provide the following information to risk-bearing organizations (RBOs) in their network:

  • On a monthly basis (within 10 days of the beginning of each month):

    • Specified information regarding each enrollee assigned to the provider, including, name, birth date, plan contract selected, enrollment/disenrollment dates, etc.; and


    • Names and total numbers of enrollees added or terminated during the month.


  • On a quarterly basis (within 45 days of the end of each quarter), a description of amounts allocated to the plan and the provider under each risk

  • Disclose, as part of the contract, specified information regarding the

    • A matrix of responsibility for medical expenses;

    • Projected utilization rates and unit costs for major expense service groups (i.e., inpatient, outpatient, primary care, etc.)

    • Factors used to adjust payments, including age, sex and geographic area.


  • Additional disclosures, including:

    • Specified information related to fee schedules used to determine payment under risk-pool arrangements; and

    • Monthly capitation payment amounts, plus details regarding any deductions made from those capitation payments.