THIS WORKS: Despite many failures, the concept of the IPA is very much alive. Those in the know tell how it can stay that way.
By Julie A. Jacob, amednews staff.
At a time when IPAs are toppling like a row of dominoes, do IPAs have a future? Conventional wisdom has been that it's more effective for physicians to contract with health plans and assume risk through IPAs than to do so independently.
But many IPAs have not succeeded as expected. More than 120 IPAs have folded in California alone since 1996 -- 31 in the past 12 months -- including California's oldest, San Mateo IPA. IPAs have also folded in Colorado, Texas, Washington and other states.
However, Albert Holloway, CEO of The IPA Assn. of America, said that the failure of some IPAs does not signal the end of the model.
"We are going through a trend of adjustment, and this adjustment is good for the industry," he said. The Oakland, Calif.-based TIPAAA represents about 850 IPAs across the country.
Holloway said that the inability of IPAs to obtain data from health plans on medical costs was a prime factor in IPA failures. "Most people foresaw this and warned the industry. Once we come out of it, we will have much stronger IPAs as a result," he said.
Here's what those involved say that IPAs need to do in order to succeed:
Have good data on costs and utilization
"Successful IPAs don't have a dependence on managed care companies for data. They have their own data," said Michael Wood, executive director of Saint Louis Management Group, which manages 30 IPAs in five states. One of the IPAs it manages, Alton Area Healthcare Inc., a 65-doctor IPA in Alton, Ill., recently won a TIPAAA award for its use of technology to streamline administrative processes and manage contracts.
In fact, a lack of data was one reason for the failure last April of Cascade Healthcare Alliance, a 200-physician IPA in Bellevue, Wash. Cascade accepted only capitated contracts, said Claude DeShazo, MD, a surgeon and Cascade's president and CEO.
"We could never get accurate data from the health plans," said Dr. DeShazo. "It made it very difficult for us to analyze our own activities."
Be well-capitalized
One common mistake that IPAs make is starting without enough capital, said Wood.
A lack of capital helped contribute to the demise of Cascade, said Dr. DeShazo, especially after the IPA was unable to find a hospital partner.
Don't take risks you can't afford
Strong IPAs have a variety of managed care contracts, yet are selective about the ones they accept, said IPA leaders.
The Physicians Inc., an 1,800-doctor IPA in Louisville, Ky., has 23 managed care contracts, yet is picky about the ones it signs, said R. Paul Jennings, TPI's president and CEO. For instance, TPI has no fully capitated contracts. While TPI is not opposed to the concept of capitation, it has yet to be offered a capitated contract that the organization's leadership thinks would be financially feasible, said Jennings. TPI also dropped its Aetna contracts last year in a dispute over the all-products clause.
Be dedicated to quality of care
Leaders of successful IPAs emphasized that they have a mission to provide the highest quality care, a mission that goes beyond the financial goal of effectively negotiating and administering managed care contracts.
For example, University Affiliates, a 3,000-physician IPA in Alhambra, Calif., is a nonprofit entity that operates more like a multispecialty group practice than an IPA, said Sam Romeo, MD, president and CEO. That allows physicians in the IPA to collaborate closely with one another on patient care.
"While we are an IPA in a legal sense, we are much more like a group practice," said Dr. Romeo, noting that "group practice is the only way you can be accountable."
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THIS DIDN'T WORK: Still picking up the pieces in bankruptcy court, the physician president of a failed California IPA assesses what went wrong.
By Leigh Page, amednews staff.
Santa Rosa, Calif. -- Though Redwood Empire Medical Group Inc. closed its doors in April, former President Don Van Giesen, MD, thinks it might take years to wrap up his failed independent practice association.
Dr. Van Giesen now meets with his attorneys to go over bankruptcy proceedings for more than $3 million in debts, as well as a lawsuit by contracted specialists who want first dibs on that money.
After 14 years of mostly successful operations, it's a heartbreaking and grueling experience. But it's a familiar one these days -- especially in California, where more than 20 medical organizations went bankrupt in 2000.
In Sonoma County, where Dr. Van Giesen practices, four medical groups have broken up in less than 12 months. REMGI was the largest, with 350 physicians serving 50,000 enrollees and an annual budget of $30 million.
Executives from other Northern California IPAs travel to Dr. Van Giesen's modest solo urology offices to hear REMGI's painful experiences and learn some lessons.
Dr. Van Giesen tells them his operation was brought down by high utilization, HMOs' unwillingness to pay for it and physicians' inability to work together and keep costs in check.
Local doctors founded REMGI in 1986 as a way to disperse capitation payments, he said. They thought predictable monthly payments would improve cash flow but didn't want direct capitation because utilization shifts too much to small groups of patients.
From the start, Dr. Van Giesen said, REMGI's seven contracted health plans "loaded us down with at-risk expenditures." In addition to the doctors' own services, the capitation paid for specialty services, some ancillary services and prescription drugs.
Nationwide, utilization of those services has risen dramatically in the past few years, forcing HMOs in other states into the red. But in California, where risk for those services is transferred to doctors, HMOs generally have fared well and IPAs are the ones in the hole.
Nonetheless, California IPA executives have always believed -- and those who survive still believe -- that their own organizations can buck the trend by tightly controlling utilization. They think they can do better than HMOs because local doctors who trust each other can set the IPA's managed care policies and make utilization decisions.
Dr. Van Giesen said the arrangement worked well for more than 10 years. But by the late 1990s, HMO reimbursements weren't keeping up with rising utilization in areas such as contracted specialty services. One factor in that rise, he said, was a new state mandate for second opinions, which allowed patients to visit expensive teaching hospitals that were out-of-network.
So in 1998, REMGI decided to begin capitating its 200 specialists through a new subcontracted specialty IPA. The specialists wanted control of their own fate, which met REMGI's goal of getting them "more involved in this whole dilemma" of high utilization, Dr. Van Giesen said.
But putting specialists in a separate organization meant that the REMGI board no longer had direct oversight of them. "We knew them personally" and were uncomfortable about prying into the group's affairs, Dr. Van Giesen said.
The specialty IPA's sudden closure in June 1999 -- with $3 million in debts due to overutilization -- eventually brought down the parent IPA, Dr. Van Giesen said.
Unable to cover its debts, the specialty group filed for bankruptcy under Chapter 7 liquidation in January 2000 and sued REMGI for its losses. REMGI had already paid the group, but -- just as many IPAs have done in suits against HMOs -- the specialists argued that the parent was responsible for its debts. The suit has not been settled.
Forced to pay specialists fee-for-service rates again, REMGI terminated contracts with its HMOs in hopes of getting higher payments, Dr. Van Giesen said.
"It certainly got everybody back to the table," he recalled. But in months of meetings, "nothing happened. [HMOs] were just buying time."
REMGI ended up signing basically the same HMO contracts because its doctors didn't like unresolved reimbursement rates. Patients were so anxious that the IPA took out a newspaper ad saying: "REMGI is not going bankrupt!''
As it turned out, finances only got worse and the actual bankruptcy filing took place in August. That Chapter 11 reorganization filing left REMGI with some control over dividing up liquidated assets, but the IPA later switched to a Chapter 7 liquidation to protect assets from the specialists' suit.
Though he has been immersed in REMGI's problems as an executive, Dr. Van Giesen said his practice has recovered quite easily from the closure. HMOs transferred his patients to two other IPAs where he and most other REMGI doctors are also members.
But both of those IPAs are controlled by hospitals outside the county, and Dr. Van Giesen fears that the whole point of IPAs -- local physicians making their own managed care decisions -- seems to be getting lost.
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ADDITIONAL INFORMATION:
During its 14 years Redwood Empire Medical Group tried hard to stay in the black:
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