PHYSICIAN GROUPS: Financial Meltdown Forecast for CA Groups
An estimated 70% to 90% of the roughly 350 medical groups in California "are in financial difficulty or even on the verge of bankruptcy" as physicians struggle to handle the requirements of managed care contracting, the Santa Rosa Press Democrat reports. The paper explains, "Spreading out the risk of treating HMO subscribers has become a difficult budgetary guessing game for doctors groups." Two bills in the state Senate, both sponsored by Sen. Jackie Speier (D-Daly City), would regulate managed care plans and would create a new agency to monitor the financial health of physician groups and intervene when necessary to prevent failure. Currently, physician groups are not supervised by any state agency, and medical group difficulties do not become apparent until it is "too late," said Michael Ashcraft, a consultant to the state Senate insurance committee (Rose, 8/24).
Sonoma County Harbinger
"Symptomatic of financial maladies within doctors groups across the state" is the recent disintegration of Specialty Physician Alliance, Sonoma County's largest group of specialty physicians. The 250-doctor group was created in 1997 to negotiate capitated contracts with primary care groups and to administer collection and billing services. But "the group underestimated its startup costs" and accepted insufficient capitated rates, according to Jim Fojut, a consultant hired to unravel the group's financial problems. Other physicians attributed the group's failure to the higher-than-expected cost of some medications, incorrect estimates for patient use of specialty services, and high administrative expenses. The group now has only $300,000 left to pay off the $3 million it owes to its specialists -- revenues that many physicians "have no hope of collecting" (8/24).