Los Angeles Times Examines Trend of Medical Group Failures
The Los Angeles Times on Sunday examined the state's "troubled" medical groups, many of which have closed or consolidated as "economic forces roiling the health care industry push doctors into ever-larger groups in the search for cost savings and bargaining power with insurers." Seven California medical groups closed between Jan. 1 and March 31 this year, and three others filed for bankruptcy. In 2001, 26 medical groups closed in the state, and 34 closed in 2000. The state has between 250 and 280 medical groups in operation today, the Times reports. Dr. Sam Romeo, president and CEO of the University Affiliates medical group, said that low reimbursements from health plans have forced many medical groups to close. In addition, the Times reports that reduced Medicare and Medi-Cal reimbursements and increased costs for new medical devices have contributed to the problem. However, the Times reports that some medical groups "have been self-defeating, building up administrative bureaucracies" that reduce doctors' salaries. The doctors "demand more and leave the group when they can't get it," which may force the groups to close, Nina Leslie, CEO of Pacific Health Care Medical Group, said. As a result, some health plans have begun to negotiate contracts with individual doctors, rather than medical groups. According to health plans, individual contracts "allow higher payments to doctors" and ensure that patients "will be able to remain with their doctor if the medical group fails."
Some doctors have asked the Department of Managed Health Care to address contract disputes between medical groups and health plans. DMHC Director Daniel Zingale said that the department will not intervene in disputes to "see that one side or the other gets a bigger share of the profits." The California Medical Association has sponsored a bill (AB 1600) that would require the department to ensure "fair" contracts between medical groups and health plans. However, health care analysts predict that the "trend of medical group failures will continue unless smaller groups can gain some contract-negotiating clout" through mergers and acquisitions (White, Los Angeles Times, 5/26).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.