The Diagnosis Is Poor for Medical Specialists Going It Alone : But in a health industry dominated by managed care, doctors can control their destiny by forming multispecialty groups.

These are tough times for Orange County’s physicians--particularly specialists who are facing a dwindling demand for their services. Cardiologists, neurosurgeons and other medical specialists are losing income, autonomy and job security as managed care takes over the marketplace.

Almost all of the county’s non-Medicare population is now enrolled in some type of managed care, and enrollment in HMOs, PPOs and other managed-care organizations continues to increase at a rapid rate.

The impetus behind this trend is the reduction in costs that has been achieved in response to pressure from large employers who purchase health care for their employees.

Managed-care organizations have been able to meet the demands of large purchasers by paying lower fees and cutting down on the use of hospitals and high-paid specialists.

What this means for doctors is that we now have an oversupply of certain types of providers. In a managed-care environment, primary care physicians serve as gatekeepers to the use of specialists to keep costs down. Specialists are becoming dependent on primary care physicians for referrals, and as these referrals are ever more tightly controlled, the number of specialists required will continue to decline. Eventually, a medical system will evolve in which only about 40% of the physicians are specialists. Today, specialists represent 60% of the physician population.

A number of specialists are likely to retire rather than give up their independence and accept lower pay in a managed-care organization. Those who decide to stay in medicine will have to move quickly to re-establish themselves in today’s rapidly changing marketplace.

But the outlook isn’t as grim as many physicians might think. There is a way for doctors to control their own destiny in a health care industry dominated by managed care: by joining or forming large, multispecialty medical groups.

Many independent physicians are giving up their autonomy to practice in medical groups that are big enough to have a significant amount of power in the marketplace. Because these medical groups handle large numbers of patients, they can negotiate better discounts with hospitals and better terms with managed-care organizations.

Managed-care organizations are eager to negotiate with these groups for two reasons, both economic: 1) it’s less expensive to deal with groups than with independent practitioners and 2) it’s an opportunity to shift the risk to medical groups that are willing to be capitated.

The larger the medical group, the better able it is to take on the risks of capitation, which limits groups to a fixed monthly income based on the number of enrollees for whom they are responsible. Medical groups can do quite well economically in a capitated system if they are vigilant about controlling costs and managing outcomes.

By joining a medical group, physicians can regain decision-making power that might otherwise be lost to managed-care organizations. Physicians in groups large enough to bear the risks of capitation can decide what care is appropriate and do their own internal utilization management and quality review. They can control referrals and reduce hospitalization and determine other ways to keep costs down.

Physicians are better qualified than anyone to decide how to provide the best quality care at the lowest cost. But in a managed-care environment, they must join forces with other physicians in order to obtain the market clout they need to maintain control over these decisions.

Many physicians are putting themselves in a position of strength not only by joining large medical groups, but also by going back to school to earn MBAs. Thus, they are preparing to work for managed-care organizations, to handle the administrative responsibilities of running a medical group, or even to pursue new careers as health care executives.

UCI’s Graduate School of Management will launch a Health Care Executive MBA program in January to help physicians and other health care professionals develop their management skills.

Unfortunately, some physicians are losing precious time by focusing their energy on efforts to postpone change that is inevitable rather than joining the managed care revolution. For example, they are lobbying hard at the state level for “any willing provider” laws that force managed care companies and other health insurers to open provider networks to all qualified practitioners willing to meet their contract conditions.

If every physician has access to an HMO’s patients, the HMO can no longer offer physician groups a large number of patients in exchange for lower prices. Ultimately, “any willing provider” laws hurt consumers by depriving managed-care organizations of the leverage they need to keep costs down.

Not everyone can be a winner in the managed care revolution. Some physicians--primarily specialists--will have to adjust to drastic changes in their lifestyles and cope with economic hardship as a result of the restructuring that is taking place in order to make our health care system more efficient.

Those who try to anticipate the changes ahead and join provider panels or medical groups, or pursue advanced degrees that will prepare them for leadership positions, are the most likely to succeed in this challenging new environment.