Referral Cost Simi Doctors, Jury Told : Malpractice suit: CEO for medical group says the physicians lost more than $1,000 when they sent patient, who later died, to a specialist.

Two Simi Valley doctors lost money when they sent an ailing Joyce Ching to a specialist, the chief executive officer of the doctors’ medical group told a Ventura County jury Wednesday in a landmark malpractice suit pitting profit against medicine.

That loss, attorney Mark Hiepler alleges, is key to the medical malpractice lawsuit he has brought on behalf of Ching’s family. But CEO Jim Agronick said such losses are normal and expected in the operation of a profitable medical group.

Ching’s family contends that because she belonged to a health maintenance organization, her doctors were reluctant to lose reimbursements by referring her to a specialist. Hiepler said that specialist might have diagnosed her colon cancer in time to save her life.

Agronick testified that doctors Elvin Gaines and Dan Engeberg lost more than $1,000 treating Ching in late November, 1992. Most of the loss came when the doctors referred Ching to a gastrointestinal specialist after three months of stomach pain.

“If money is not spent on referrals, it stays with the group,” Agronick said. Gaines and Engeberg are partners in the group Agronick manages.

Agronick said it is expected that some patients will cost more to treat than others. In the end, profits from other cases make up for such losses.

“We don’t look at it on an individual patient basis,” he said. “Some go to the doctor a lot while others don’t go at all.”

The HMO system has a built-in incentive to restrict expensive treatment and resist referring patients to medical specialists, a practice of capping the amount of money paid to doctors that is known as capitation. In an unprecedented approach to malpractice allegations, Hiepler has promised to put the capitation system on trial alongside the two Simi Valley doctors.

Hiepler called Agronick to the stand Wednesday to explain both the capitation system and Gaines’ and Engeberg’s contract with the Metropolitan Life HMO, which is not named in the suit.

Agronick told the jury that MetLife sent the doctors a monthly payment for each member patient they signed up, regardless of whether the doctors examined that patient that month.

He agreed with Hiepler that to be financially sound the office had to attract as many HMO patients as possible.

“In general, more patients would be better for the group,” Agronick said.

Hiepler has alleged that “assembly-line medicine” contributed to Ching’s death. Agronick said MetLife paid the doctors $26.30 a month in May and June, 1992, to treat Ching before increasing that payment to $27.94 a month through November, 1992. Out of those monthly fees, the doctors were expected to serve as Ching’s general practitioners. The doctors also were required to pay what amounted to a $5,000 deductible if Ching required any specialized treatment.

In all, the doctors received $192.30 from MetLife for Ching while spending $1,276 treating her after she began complaining of stomach problems, Agronick said.