Bee Examines Failing State of Physician Groups
Lawmakers have begun exploring ways to mitigate the impact of the state's failing physician groups, which have struggled largely because physicians "simply resisted the realities of managed care," the Sacramento Bee reports. According to the California Medical Association, up to 85% of California's medical groups "are on the verge of insolvency or heading in that direction." Between 1996 and 1998, 99 of the state's 300 physician groups "had closed or filed for bankruptcy," the CMA said. The state Assembly last week "began looking at ways to minimize patient upheaval and ward off insolvency when practices run low on cash," the Bee reports. In addition, to help "stem the tide of red ink," physician groups will have to file "audited financial reports" to the Department of Managed Health Care beginning in May. Citing El Dorado Medical Associates' failure, the Bee reports that many physician groups have not adequately adjusted to the capitation payment system, under which health plans pay doctors a fixed amount each month to treat a particular patient, "regardless of what care the patient needs." Physician groups contend that capitation rates fail to cover the costs of treating patients, while insurers argue that doctors have not managed their funds properly.
And according to the Bee, insurers "aren't likely to raise payments" because of their unwillingness to raise premiums. Meanwhile, Golden State Medical Group in El Dorado County may serve as a model for other physician groups hoping to remain solvent. Golden State "avoided closure" last year by selling half its practice to Medical Pathways, an "outside firm" that "has helped transform 18 faltering physician groups in the last two years." Still, discussing the Golden State partnership, Medical Pathways CEO Michael Eberhard said, "We've stopped the bleeding. Now we have to start moving into margins where we can build up reserves to the point where a bad month of claims won't sink us" (Rapaport, Sacramento Bee, 1/21).