Financial Statements
Provider Type
- Participating Physician Groups (PPG)
- Hospitals
Health Net monitors and evaluates the financial viability of its delegated and capitated participating providers and maintains adequate procedures to ensure providers' reports and financial information confirms each provider is financially solvent (section 1300.75.4.5(a)(1) of Title 28 of the California Code of Regulations (CCR)).
All providers with a capitated Provider Participation Agreement (PPA) are required to submit their annual financial statements to Health Net 150 days after the close of the participating physician group's (PPG's) or hospital's fiscal year. PPGs and hospitals are further required to submit to Health Net quarterly financial updates, prepared by the provider organization and reflecting year-to-date activity, within 45 business days after the close of the calendar quarter or most recent quarter, if provider's fiscal year is different from calendar year.
PPGs' and hospitals' financial statement packets should include:
- Signed Health Net financial certification form (for quarterly unaudited financials only).
- DMHC quarterly and-or annual financial survey report forms as detailed in subsection 1300.75.4.2(b) and ( c) of Title 28 of the California Code of Regulations (CCR) including:
- balance sheet
- an income statement
- a statement of cash-flow
- a statement of net worth
- cash and cash equivalent
- receivables and payables
- risk pool and other incentives
- claims aging
- notes to financial statements
- enrollment information
- mergers, acquisitions and discontinued operations
- the incurred but not reported (IBNR) methodology
- administrative expenses
- footnote disclosures (for annual audited financial survey)
For nonprofit entities, refer to subsection 1300.75.4.2(b) and (c) of the California Code of Regulations for additional requirements.
PPGs and hospitals must submit these quarterly financial updates and annual audited financial statements to the Financial Oversight Department
PPGs and hospitals must also ensure compliance with Health Net's financial solvency standard benchmarks and related contractual requirements to make sure their financial status is stable and not deteriorating over time. If the PPGs and hospitals fail to meet the financial solvency standard, and it is determined by Health Net that a corrective action plan (CAP) is needed, the PPGs and hospitals must submit a CAP within 30 days from the date of request. Below are the 14 financial solvency review standard benchmarks that must be met:
Provider Type | Category | Standard |
|---|---|---|
PPG, Hospital | Working Capital | Must be positive |
PPG, Hospital | Tangible Net Equity | Must be positive |
PPG | Required Tangible Net Equity | Refer to 1300.76(c)(1) of Title 28 of CCR |
PPG | Cash to Claims Ratio | = or > 0.75 |
PPG, Hospital | Cash to Payable Ratio | = or > 0.50 |
PPG, Hospital | Profit Margin Ratio | > 0.00 |
PPG | Medical Loss Ratio | = or < 0.85 |
PPG, Hospital | Debt-to-Equity Ratio | = or < 1.0 |
PPG, Hospital | Accounts Receivable Turnover | = or > 11.81 |
PPG, Hospital | Average Days to Collect | = or < 30 days |
PPG | Average Claims Liability | between 2.5 & 3.5 months |
PPG | General and Administrative Expenses | = or < 0.15 |
Hospital | Total Operating Expense | = or < 1.0 |
PPG, Hospital | Total Z-Score | = or > 1.81 |
If the PPG is determined to be noncompliant, a corrective action plan (CAP) must be filed simultaneously with the financial survey to the Department of Managed Health Care (DMHC).
PPGs With Sub-Delegating Risk Arrangements
PPGs with sub-delegating risk arrangements are required to monitor and evaluate the financial viability of their delegated and capitated participating providers and maintain adequate procedures to ensure providers' reports and financial information confirms each provider is financially solvent according with section 1300.75.4.5(a)(1) of Title 28 of the California Code of Regulations (CCR) and with Health Net’s financial benchmark as outlined above. When requested by Health Net, PPGs are required to provide copies of their monitoring policies and procedures within 30 days of Health Net’s request.