FPA MEDICAL MANAGEMENT: Could Pull Out Of Sacramento Market
FPA Medical Management Inc. said Monday that "it will pull out of Sacramento ... unless its operation here turns a profit soon." The Sacramento Bee reports that FPA, one of largest physician management companies nationwide, "reported disappointing first quarter earnings last week," blaming rising health care costs in its Sacramento and Arizona markets for its $5 million loss. FPA CEO Stephen Dresnick said the company will have to "exit those markets" if it does not start turning a profit, which the company will attempt by trying to "renegotiate higher reimbursement rates" or "canceling contracts with certain plans." He said, "We're not ruling out any options." The Bee reports that FPA has also "frozen hiring and capital spending." Volpe Brown Whelan analyst John Ederer said, "I'm pleased with what I'm hearing. [Dresnick]'s focusing on the operations. He's trying to turn things around." However, Ederer added, "My concern is that the problems are already too big and may be beyond his control."
The Bee reports FPA's withdrawal from the Sacramento area could possibly disrupt "health care for thousands of patients," and would also have a major impact on hundreds of doctors; FPA serves more than 56,000 patients and employs 33 doctors in additions to its contracts to refer patients to another 500 physicians. The company entered the Sacramento market in 1996, but "has had a bumpy ride" here, Bee reports. Doctors have complained that FPA is late with payments, which caused some to leave the group ( see CHL 4/10). Bill Sandberg, head of the Sacramento-El Dorado Medical Society, said that "FPA's troubles concern local physicians." He said, "I think the physician community and hospital community are concerned when for-profit entities come into an area and end up getting into severe financial problems and end up pulling out" (Young, 5/19).