DOCTORS’ GROUPS: Bleeding Red, May Get State Oversight
In the wake of "failing medical groups" across California, the state Department of Corporations is "considering developing legislation that would enable it to monitor medical groups' solvency," Modern Healthcare reports. According to the California Medical Association, "at least four local physician organizations have filed for bankruptcy protection since November" and at least "three others are on the verge of insolvency." Dr. Jack Lewin, CEO of CMA, said, "California used to be the leading edge. Now we're the bleeding edge." To help alleviate what it believes has been a drain on physician groups' finances, the CMA is considering sponsoring legislation "that would require HMOs to offer capitation contracts without pharmacy risk."
Save it for a Rainy Day
But Dr. Ira Davidoff, chair of the American Medical Group Association, thinks otherwise. While he "acknowledges that California physician groups have been walloped by drug costs and Medicare risk expenses," he said, "In any industry, you have to learn to deliver your product or service for what the market is willing to pay." Davidoff says his group, Bay Valley Medical Group, has stayed profitable mainly by staying out of debt and saving earnings for "hard times." Modern Healthcare reports that a Medical Group Managagement Association study has found that many doctors' groups don't have the business smarts needed to keep them out of the red. The "Performance and Practices of Successful Medical Groups" study found that successful doctors' groups "generate more of their assets from internal operations than their [less-successful] peers, making them more likely to weather adverse business conditions." In addition, Modern Healthcare reports, the study said "profitable groups use cost structures that are relatively low, bill and collect rigorously, use strategic planning, reward physicians for hard work, invest in quality management and information systems, focus on customers" and do not leverage themselves "to the hilt" (Jaklevic, 1/18 issue). Click here to read past coverage of ailing doctors' groups in California.