DOCTOR GROUPS: California IPAs On the Mend?
With the failures of Southern California Independent Practice Association, MedPartners Providers Network and FPA Medical Management, this year has been one of "disruption and uncertainty" for many physicians. Tom Gray explores the problems of independent practice associations (IPAs) in the Los Angeles Times. IPAs are the largest type of HMO delivery system in California, managing the care of 6.3 million residents. But of the 300 IPAs in California, 75% to 90% are in trouble. Northridge Hospital President Roger Seaver said, "It's no secret that the margins in this business are almost nonexistent in the best of cases. We've structured it to work, but no physician is getting overpaid right now." Lakeside Healthcare, which includes an IPA and a large group practice, faces hard times while trying to pay off a bank debt. But according to founder and president Dr. Francisco Federico, the business is "stronger today than it used to be." He said, "We've never been operationally more sound because we've spent the last year and a half focusing on operations." Lakeside has had to cut reimbursement to physicians and end its relationship with the HMO Health Net. "Some doctors had to stop seeing some patients; other doctors had to join other groups to see their patients," Federico said.
Too Big and Too Small
IPAs also face the delicate balance between being too large or not being large enough. Federico said, "You have to get to a certain size to achieve economies of scale." Other doctors insist that a smaller size helps them keep in touch, as well as keep a handle on the group's costs. El Segundo-based health care consultant Steve Valentine said that "big IPAs are especially prone to cost-control problems because their members don't all work together in the same practice, where 'you can get your behaviors together' and agree on appropriate standards of care." IPAs are beginning to take note of their financial risks, and are moving away from "dual-risk" contracting, where fees for both physician services and hospital costs are fixed. David Olson, senior vice president of investor relations at FHS, Inc., Health Net's parent company, sees IPAs making a comeback. He said, "The one thing we've demonstrated here in California is that doctors who work together in an IPA or group setting can produce high quality health care in a manner that is conscious of cost." Still, Federico insists that "groups' costs keep mounting as employers, the public and politicians demand more services." And Valentine adds that with all of the health industry's troubles, there still will be "a huge day of reckoning coming" before things start to get better (11/3).