MANAGED CARE: Ailing System Sticks Doctors with Unpaid Claims
Once hailed as "a model for containing America's fast-rising medical costs," California's managed care industry has created a "chaotic and discombobulated environment" that has left many physicians with millions in unpaid claims, today's Wall Street Journal reports. Annual premiums are rising to double digits after having stabilized and even lowered in the 1980s and mid 1990s. According to some, the basic problem with California's ailing system lies in the structure of the system. In California, medical groups act as intermediaries between HMOs and individual physicians. HMOs pay a set monthly amount to the groups who then divide the money to cover all patient care needs. But the system is faltering as many of the groups have become "bureaucracies that suck money out of the system without necessarily improving care." According to a recent PricewaterhouseCoopers report completed for the California Medical Association (CMA), physicians in the state receive only $13 out of every $120 in premiums paid to the HMOs. In addition, the capitation fees that HMOs pay are based on what the HMO is willing to pay rather that on medical cost analysis. According to the report, premium rates in the state have fallen 35% to $29 per member per month in the last seven years, while medical costs, particularly prescription drug costs, have increased 7% per year over the last two years (Rundle, 11/15). California health plan premiums are nearly 40% lower than other regions of the country. The report found that the average premium in California was $135 compared to $174 in the Northeast. Individual physicians, who have seen their incomes reduced significantly, bear a large part of the strain. According to Dr. Marie Kuffner, president-elect of the CMA, financial distress is causing a number of physicians to leave California to practice in areas where reimbursement rates are more favorable. She said, "If this continues, it will reach the point where errors in treatment will happen because doctors are treating too many patients. Then, at some point, there will not be enough doctors to take care of the number of people seeking care." She added that consumers are largely unaware of the financial strain on physicians because they do not realize how much each office visit costs. She said, "They don't even know the two main reasons why premiums are going into the double digits. It is the cost of the new equipment and it is that people are living longer so they are getting treated for more problems that 20, 30 years ago would have killed them" (Rose, Santa Rosa Press-Democrat, 11/12). Patricia Powers, executive director of the Pacific Business Group on Health, which represents 30 of the state's largest employers, said, "We're at a crossroads -- and we can't continue the way we have been" (Rundle, 11/15).
Too Late for Some
The CMA estimates that nearly one third of the state's 350 medical networks have closed or filed for bankruptcy over the last five years, sticking physicians with millions in outstanding claims. According to the CMA, two of those groups owe state doctors $100 million. California law requires HMOs to pay physicians within 45 days after receiving a claim, but doctors indicate that the requirement is largely ignored. Dr. Silas Thomas, a Los Angeles obstetrician, was stuck with nearly $250,000 in outstanding claims when FPA Medical Management Inc. filed for bankruptcy under Chapter 11. When Thomas pursued the payment issue with the HMOs whose patients he had treated, the HMOs refused to pay, saying that it had already paid FPA for those patients and shouldn't have to pay twice. Thomas has since joined 100 other physicians who have filed a $9 million claim against the company. Stephen Dresnick, who took over the reigns at FPA prior to its collapse, said that "on a personal level, I feel terrible. FPA was a sick company in a sick industry." Thomas, who has moved out of his "dream house" and secured a $130,000 loan to keep his practice afloat, noted that most people do not have sympathy for physicians. He said, "We're all supposed to be rich. I would probably be better off financially today if I had stayed in the pharmacy business" (Wall Street Journal, 11/15).