Managed Care Faces ‘Difficult Environment’

The financial turmoil of physician groups in Southern California has not touched the lives of most patients, at least yet. But it has not always been easy for doctors and hospitals to keep medical care on track.

Failure of actual group practices--doctor-owned businesses that provide medical care--is fortunately rare. Most of the groups that have failed or disbanded recently have been of a different kind--managed-care middlemen rather than actual providers of care.

In their most common form, independent practice associations, these groups negotiate contracts with HMOs on behalf of physicians and then administer the contracts--paying the doctors’ fees, for instance. They also assume the risk of caring for the HMO’s patients even if that costs more than the HMO has agreed to pay, so they can get into financial trouble if their cost of care exceeds the contracted payment.

If the group then folds or disbands, the doctors may miss payments and patients have to be shifted to new or existing IPAs, under new HMO contracts, to stay with their doctors.

That’s more or less what happened when the Pasadena-based Huntington Provider Group shut down its San Fernando Valley operation, called the Southern California Independent Practice Assn., this summer. Huntington’s president, Dr. Barton Wald, cited the “difficult environment” for managed-care groups in announcing the shutdown in May.

Physicians moved as quickly as they could to find or set up new groups to keep the roughly 62,000 SCIPA patients covered when the group closed on Aug. 31. Northridge Hospital Medical Center organized a new group of about 200 physicians covering some 35,000 patients. Friedman and several other West Valley doctors have started to organize a new IPA of their own. Other groups have stepped in to sign up former SCIPA patients. But some of the doctors caught up in this turmoil say they still are not sure where all the patients will end up.

“It was a nightmare for the patients, it was a nightmare for the doctors, it was a nightmare for everybody,” said West Hills general practitioner Serena Friedman.

Friedman said she had about four weeks to make new arrangements for 900 of her patients whom she was treating under SCIPA contracts. She said she’s managed to keep about 90% of her old patients in the fold, and like most physicians doing managed-care business, she’s now in several IPAs. She also said she’s still trying to get her last month of SCIPA payments.

For Brian Greenberg, a pediatrician practicing in Tarzana and Agoura Hills, the SCIPA closure has helped create an “enormous data fog.”

Greenberg heads a small IPA called Valley Health Medical Associates, a group that “has gone from 300 patients to 3,900 in a period of four months” due largely to spillover from SCIPA.

He believes the actual number of enrollees is higher than that, based on the ones he sees who are covered by one of Valley Health’s managed-care payers but have not yet shown up on the IPA’s list of enrollees. Until they’re officially enrolled, he said, the IPA doesn’t get paid.

Greenberg, who like Friedman had also been part of SCIPA, said the breakup of physician groups costs practices money in three ways. One is the direct loss of payments from health plans. Another is the interruption of fee income while patients are transferred between plans. The third is the loss of productive time spent on extra administrative work. Greenberg figures that he has spent three to five hours a week dealing with IPA disruptions.

But the bigger issue, he said, is the disruption of patient-to-doctor and doctor-to-doctor links that make for good medical care. He said he’s seen patients transferred suddenly to different primary-care doctors or to different specialists because a group was either cutting back on coverage or disbanding.

“It was not a huge number of patients, but for each one individually it was a big deal.” He said the SCIPA closure also disrupted relationships between primary-care doctors, specialists, laboratories and other services. The situation has settled “a little bit,” he said, “but I don’t think it’s going to really stabilize until the end of the year.”