PHYSICIAN GROUPS: Failures Raise Questions, Answers
With the financial collapse of medical group giants MedPartners Inc. and FPA Medical Management, benefits managers with employees in California health plans are growing concerned. While other states, most notably New Jersey and Texas, have encountered medical group difficulties, problems in California appear more dire, as its HMOs are more likely to rely on capitation contracts, which shift financial risk from the health plans to provider groups. Many HMOs now purchase insurance products to protect them from medical group failures. "It's on everyone's radar screen these days, given what happened with MedPartners and FPA," said Emma Hoo, senior project manager at the Pacific Business Group on Health. Industry experts note, however, that the disruptions to care are far less severe than expected, due primarily to the fact that most physicians participate in several provider groups. When one group fails, the doctor typically belongs to another group that also maintains a contract with the same health plan. "It's generally not that big a deal," stated John Garner, a benefits expert, adding, "The problem is when something happens suddenly, like last year when FPA folded. ... In some cases, there were doctor's offices that just physically closed. That's the exception."
Learning From Mistakes?
Benefits managers explain that some health plans have increased their oversight of physician groups, developing individual, "silent" contract arrangements with doctors who are already under contract with other groups. Health plan administrators will activate the silent contact only if the physician's group fails. But each group failure appears to be speeding up health plan response times. "Perhaps it is an indicator that the plans are figuring out that they have to be ready to adapt to this type of disruption and figure out alternative delivery as fast as possible," said Barbara Decker, benefits manager at Rosemead-based Southern California Edison. While more prevalent in California, many HMOs nationwide are requiring provider groups to present letters of credit prior to contracting with them. The letters serve as protection for health plans against financial liabilities, should the medical group fail (Ceniceros, Business Insurance, 10/4 issue).