PHYSICIAN GROUPS: IPA Financial Crisis Looms Over System
At least 34 -- or almost 10% -- of the state's physician medical groups or independent practice associations (IPAs), which comprise a key element of the California managed care system, are on the verge of collapse and may go bankrupt by the end of this year, according to a new PricewaterhouseCoopers report commissioned by the California Medical Association (CMA). The economic strain has already and will continue to place more than 10 million Californians in danger of interrupted or delayed care, the CMA concludes. The collapse of FPA Medical Management and MedPartners Provider Network this year affected more than two million patients and left thousands of physicians with over $100 million in unpaid medical bills. CMA CEO Dr. Jack Lewin said, "Medical groups and independent physicians associations are going bankrupt across the state because HMOs are forcing doctors to do more with less. They have placed the burden of paying for patient's health care on the physicians through capitation and then squeezed capitation rates down to the point where they are often insufficient to cover the cost of care." Capitation rates have fallen from a high of $45 per patient from 1990 to 1993 to $29 from 1997 to 1999, a 35% decrease while the cost of living increased 25.2% (CMA release, 9/2). The CMA cites shrinking HMO payments, rising prescription drug costs and greater financial risk assumed by the medical groups among reasons for the crisis (Ferraro, Sacramento Bee, 9/3). Already 15 IPAs have declared bankruptcy this year, bringing the total since 1996 to 115.
While physicians and managed-care companies lay blame and point fingers, it is the patients who lost out, according to patient advocates. Peter Lee, executive director of the Los Angeles- based Center for Healthcare Rights says that "the poor health of physicians organizations holds dire consequences because as the groups lose money they tend to ration patient care more tightly" (Bernstein, Los Angeles Times, 9/2).
Initially drawn to the idea of acting as middle men between managed care companies and individual doctors, physicians groups ask risk managers gained popularity because they, not the insurance companies, made the medical decision for their patients. However, many of these organizations are not subject to state regulations, so their financial status was not pubic information. While the state Legislature wrestles with regulations issues, only 30 out of the state's 300 physicians organizations are required to let state regulators review their books and financial records without the group's consent. State Sen. Jackie Spier (D-Daly City) has proposed a bill that would "bring the groups under the state's umbrella," even though Gov. Gray Davis has left that out of his health care reform package. Spier says that her bill "creates an early warning system to register all medical groups in the state and grade them." The Los Angeles Times reports that many health plans already "police physician groups, demanding to see an organization's books before contracting with them." HealthNet and Aetna U.S. Healthcare place some organizations on financial watch and may choose to revoke certain privileges to those in "shaky financial condition." Tom Williams, president of Aetna's Western division, predicts that the current financial troubles will give rise to a "mixed model," where some patients are covered by large groups, while other will go to doctors who contract directly with health plans, and assume less financial risk (Berstein, 9/2).
Unions to the Rescue?
While California contemplates changes to the health care system, the movement toward physician unionization remains in the "early stages of development" the San Francisco Chronicle reports. For the same reasons physician groups started -- HMOs challenging treatment decision while lowering physician incomes -- some physicians hope unionization will give them greater leverage in negotiating with managed care organizations. Dr. Kathy Fields, a San Francisco dermatologist, says "A lot of us are getting off the plans where they pay miserably or they pay tardy. Doctors feel terribly devalued. They need a voice." This year, she joined the Union of American Physicians and Dentists (UAPD), one of six unions trying to organize the 737,000 licenced physicians. UAPD President Dr. Robert Wienmann states that "Our new membership is coming from doctors who resent cost controls." However, the threat of a physician union strike worries some health care providers. Lewin calls the concept of a strike "an unethical concept," noting that he favors collective bargaining done by IPAs. He argues for the involvement of the state government in passing legislation giving IPAs "more clout" at the negotiating table. U.S. Rep. Tom Campbell (R-Santa Clara) has proposed a bill that would give physicians more room to set up large negotiating groups than currently allowed under antitrust laws. In addition, Lewin urges California lawmakers to use a Texas law that exempts private physicians from federal antitrust laws and allows the state attorney general to mediate rate-setting negotiations with HMOs. But physicians should expect opposition for health plans. American Association of Health plans Spokesperson Susan Pisano says, "We don't support the idea that hundreds of physicians can form a price-fixing cartel" (Abate, San Francisco Chronicle, 9/3).