CALIFORNIA : Meeting Shows Health Industry in Disarray : Crisis: With many physician groups in financial straits, competing interests at Sacramento session argue over blame and what to do.

The snowballing financial crisis among the physician organizations that dominate managed care in California will be difficult to fix, with competing interests squabbling over what should be done--and who should pay.

The picture that emerged at a Sacramento meeting on the problem Thursday was of an industry in disarray, facing a slew of legislative initiatives and at odds with itself on what the future holds.

Representatives of health plans in attendance cringed as doctors and physician organizations blamed them for their current straits. Leaders of the doctor groups deflected questions about whether their industry--in which companies formed by doctors take monthly fees from health plans to provide all or most aspects of patient care--would survive, and whether they should remain for-profit.

State Sen. Jackie Speier (D-Daly City), who has been leading legislative efforts to effect financial standards for the doctor groups, urged the 250 meeting participants to compromise--and to steel themselves for change.

“I wouldn’t invest too much in today’s model,” declared Speier, who addressed the group of doctors, health plan executives, lobbyists and regulators in a lunchtime speech. “The rules will change more frequently than you can imagine.”

At issue is the delivery of care for more than 20 million Californians who participate in what is known in the industry as prepaid health care, or managed care. This system is largely made up of mostly for-profit physician groups, run by doctor-entrepreneurs and often affiliated with hospitals.

As many as 115 of doctor groups have gone bankrupt or folded over the last three years, and two dozen more are expected to fold between now and the end of 1999, according to data presented at the meeting by the California Medical Assn., which sponsored the gathering.

Consumers suffer in a variety of ways when a group goes under, as some are forced to find new doctors and others are denied care as the organization tries to save money.

In the next few years, predicted Speier and others at the meeting, middleman companies such as the physicians group could well disappear. Those that remain will be highly regulated.

Bills by Speier and Assemblyman Martin Gallegos (D-Baldwin Park) address financial issues, but it is not clear whether Gov. Gray Davis, who has fielded his own proposed package of managed-care reforms, will accept them.

During the meeting, health plans presented a more modulated view of the future. Managed care’s new structure, several executives predicted, might include subtle changes such as the development of a model that relies less heavily on doctor groups, or that forces them to take less risk.

“There have been a great many benefits from this California model,” said Walter Zelman, president of the California Assn. of Health Plans. Contracting with physician groups to parcel out the money and provide care has not only kept premiums in California low, Zelman said, but it has put decisions about patient care in the hands of doctors rather than health plans.