Latest California IPA failure linked to low pay rates

University Affiliates is the 11th IPA in California to shut down this year.

By Julie A. Jacob, AMNews staff. Aug. 12, 2002.

Yet another IPA in California has shut its doors, with the IPA's leader blaming low reimbursement rates from managed care companies and the state agency that regulates managed care for its demise.

University Affiliates, based in Alhambra, Calif., had 2,500 physicians in its network and treated 140,000 patients. It ceased doing business June 26, the 11th IPA to shut down in California so far this year. Last year 26 IPAs failed in the state.

In a letter to its patients, the IPA's CEO, Sam Romeo, MD, blamed problems on an agreement two years ago to treat the patients of failed IPA FHC. Those patients were covered under Aetna, Health Net, CIGNA and Blue Cross of California. Taking on the FHC patients resulted in increased utilization costs and an increase in claims volume, he said, resulting in a $6 million loss in 2001.

Although Aetna and CIGNA renegotiated their contracts with IPA, the insurer with the IPA's biggest contract, Blue Cross of California, refused to increase its reimbursements, Dr. Romeo said. He said he appealed to the California Dept. of Managed Health Care, which said it could not intervene in the rate negotiations between the IPA and Blue Cross.

"The department had decided that it doesn't care about the care of patients. ... The department said it does not deal with competitive rates and reimbursement," said Dr. Romeo. [...]