Doctors Learn to Operate in a New Business Climate

Once a month the wealthy doctors spend a long weekend at the Hyatt Newporter, in rooms overlooking the swimming pool and nine-hole golf course. But that’s about as close to those amenities as they will get.

The doctors aren’t at the luxury hotel for respite, but for what some regard as survival training: They are earning MBAs.

The group of about 50 doctors, whose average annual income is $230,000, constitutes the inaugural class of UC Irvine’s Health Care Executive MBA program--one of two of its kind in the country. UCI launched its program in January, joining the University of South Florida in offering the nation’s only advanced business degrees especially designed for physicians.

“I haven’t seen the tennis courts, the in-room movies or the golf course,” said Jerald Waldman , 50, a surgeon who, like his classmates, devotes 14-hour days to business studies at the monthly gathering. “The work is too intensive for that.”

The temptations of the hotel will be a thing of the past in a few years when UCI moves the program to campus. Right now, there’s simply no room, officials said.

The university began the two-year, $48,000 program as a way to capitalize on physicians’ growing need for business acumen in a marketplace dominated by corporate, managed health-care systems.

“The MBA is really hot,” said UCI professor Paul Feldstein, who fielded 2,000 inquiries about the new program last year. “Physicians want to get control back, and they know the way to do it is through the business end.”

Although many universities have for years reported a steady increase in the number of physicians enrolling in traditional MBA programs, which also take about two years to complete, experts predict programs tailored to physicians will become more and more popular.

The University of South Florida is considering doubling the size of its physician-MBA class to 80, and the University of Utah is developing a similar program that might begin next year.

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Twenty years ago, doctors in small private practices charging fees for services effectively ruled the health-care system. But enormous pressures, chiefly by big employers grappling with skyrocketing insurance costs, have radically altered the traditional health-care system.

HMOs and other managed-care systems, in which physicians work under contract with large corporations whose administrators set fees and guidelines for service and treatment, began supplanting private practices over the past decade. Today, managed care, which limits patients’ choice of doctors but also reduces fees for routine treatments, provides medical services to more than 70% of insurance holders nationwide, and their control is expected to spread.

The shake-up has left some physicians bewildered.

“Would you ever think of having a nonbanker in charge of the banking industry?” said Paul Smith, a Long Beach obstetrician-gynecologist and a student in UCI’s program. “Crucial medical decisions are being made by people who have never dealt with patients.”

Said Marian Hill, director for the University of South Florida’s MBA program: “What’s drawing people to our program is a tremendous sense of uncertainty. They don’t want to be painted into a corner by misjudging what’s going on now. They want to have options. They want to survive.”

Some physicians now view business skills as a wise preventive measure against, if not a remedy for, the growing power of managed-care companies. Physicians are banking on their MBAs making them more competitive in their current jobs or preparing them for administrative careers or entrepreneurship.

Especially vulnerable to the sweeping changes have been medical specialists such as Waldman, a practicing orthopedic surgeon for 19 years. Specialists have been particularly hard hit by managed-care systems, which tightly restrict the use of the highly trained--and higher-paid--doctors.

Income in some traditionally profitable specialties--cardiology and orthopedics, for example--plummeted 30% to 40% in 1995. Waldman said southern Orange County lost a quarter of its orthopedic surgeons in 1995.

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Like so many other doctors, Waldman adapted to survive. When he started his practice, 95% of Waldman’s patients paid on a fee-for-service basis. Now it’s down to 5%, leaving his Mission Viejo practice almost entirely dependent upon less lucrative payments from managed-care systems and Medicare.

“We have to work harder and see more patients to cover our overhead,” said Waldman, who lives in Laguna Beach. “We have to learn to run a much more efficient organization. We have to become businessmen.”

Waldman is considering moving into an administrative post for a managed-care organization once he obtains his MBA. In the meantime, Waldman hopes the program will strengthen his negotiations with insurance companies.

“We need to understand where they are coming from, what forces are driving them,” Waldman said. “This program is giving us the language to speak on their level.”

Indeed, the physicians read as many as 80 textbook pages a day trying to become fluent in “business-speak.” Professionals who haven’t been in school in decades suddenly are finding themselves poring over strange topics like accounting, marketing principles and management of complex organizations.

“It’s not like reading a novel,” said Smith, 55, who lives in Lake Forest.

Students, who spend 20 hours per week on studies, quickly discovered school to be very taxing when combined with work and family. Because they do the bulk of their work outside class, students keep in close contact with professors via e-mail.

Most demanding of all are the monthly class gatherings at the Hyatt. Students check in at 5 p.m. Thursday and don’t leave the premises until noon Sunday.

In between, it’s strictly business. A typical day includes lectures, in-class assignments and intensive research.

“We even have speakers at dinner,” Smith said. “The whole weekend is a blur. It’s incredibly concentrated.”

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Though their workload is considerable, the health-care MBAs are catered to in ways that would certainly make other students envious. The MBA students, whose average age is 44, are automatically registered for courses and are given computer laptops, hand-delivered textbooks and special assistance in library research.

UCI business school officials explain they know their market.

“We make it easy for them,” Feldstein said. “They don’t have time for a lot of this stuff. They wouldn’t put up with it anyway.”

UCI’s program also accepts health-care professionals who aren’t physicians. But such students account for only five of 54 spots in the MBA class.

Nurse practitioner Linda McCutcheon of Irvine enrolled in the UCI program to capitalize on the rise of managed-care organizations--a system that has largely benefited her cost-effective profession.

“We are going to be more and more in demand by managed-care systems,” said McCutcheon, 46. “It’s important they be integrated into the health-care system appropriately though, and not misused.”

Once health-care professionals and physicians are armed with business degrees, what then?

“They’ve been complaining that health-care decisions are being made by people without a health-care background,” Feldstein said. “This will give them a chance to see if they can do any better.”