The bankruptcy filing of a large Dallas-area independent practice association has raised questions about the viability of IPAs and their ability--or inability, as the case may be--to manage risk.
In July, Genesis Physicians Practice Association, a 960-physician IPA, filed for Chapter 11 bankruptcy protection in federal district court in Dallas in an effort to buy time to reorganize its risk contracts. The IPA got into the risk management business in 1995 and quickly secured capitated contracts for 30,000 HMO enrollees from seven health plans.
But GPPA struggled to manage the capitated contracts, and problems with claims processing created a financial shortfall. Chairman Ralph Turner, M.D., estimates the IPA lost at least $7 million; about one-third of that is owed to physicians, one-third to hospitals and one-third to payers.
The GPPA bankruptcy follows a filing last December by a Denver-based IPA that went under owing almost $3 million to its 1,500 physicians. While the GPPA bankruptcy has member physicians wondering if they will ever receive the money they are owed, it has other area physicians feeling skittish about IPAs in general.
"It makes everybody reassess things, and has people thinking, maybe physicians aren't suited to manage risk," says Dallas OB/GYN Robert Gunby, M.D. "Most good physicians have been patient advocates and (do not have a) bottom-line mentality. To make a risk contract work, you've got to tighten down and do whatever is necessary to reduce care. It's a foreign concept to most physicians."
GPPA is no stranger to controversy or media attention. The group made headlines last year after it terminated its contract with Aetna U.S. Healthcare, claiming the insurer failed to provide accurate and timely financial and clinical data for the 8,000 Aetna HMO enrollees the IPA's practices cared for. The termination forced about 26,000 patients to either find new physicians or pay more out of pocket to continue seeing their Genesis physicians.
Turner, a Dallas OB/GYN, says terminating the contract with Aetna did not contribute to GPPA's current financial problems. Instead, he places the majority of blame on the third-party administrator that processed GPPA's claims, Arlington, Texas-based Harris Methodist Health Plan. Harris processed claims for the physicians in 1997 and 1998, but after hearing complaints from physicians about late payments, GPPA turned its claims processing over to Dallas-based Inova Health Care in December of last year. Turner says GPPA became aware of the extent of the claims backlog only when Harris employees began bringing boxes of unprocessed claims to Inova. "They (Harris) just weren't paying claims," Turner says.
Harris spokeswoman Lisa O'Steen says it's news to her that Harris is the cause of GPPA's problems, and that the company "stands firm behind our business practices."
In early July, GPPA made one last-ditch effort to recoup its losses and cover the backlog of claims. The IPA began withholding 25% from physicians' fees, but it wasn't enough. A few weeks later the IPA declared bankruptcy.
"Right now we're just trying to figure out what happened. We were aware there was some problem with claims, but there are times you are aware things are happening, but you just can't seem to fix them," Turner says.
Stephen Arnold, director of managed care for COR Specialty Associates of North Texas (CSANT), a 53-physician multispecialty group in Dallas, suspects Harris is not the sole cause of GPPA's problems, and a $7 million deficit is the result of much more than claims problems. Perhaps, Arnold suggests, GPPA simply didn't have the infrastructure to manage risk.
"One of the arguments Genesis uses is they weren't aware of how deep the problem was because they didn't have the claims data," he says. "My criticism is that's why your management is there-to manage the claims."
Eleven of CSANT's physicians belonged to GPPA, and Arnold is now trying to recoup more than $200,000 in unpaid claims from GPPA. CSANT terminated the GPPA contract just 24 hours before the IPA declared bankruptcy. Before terminating the contract, CSANT turned the account over to the Department of Insurance for assistance recovering payment. Although Texas has a 45-day prompt-payment law, IPAs fall into a gray, as yet unregulated area, and the prompt-pay law does not apply to them.
Although GPPA accounted for only 5% of the CSANT's total net revenues, the experience has soured Arnold on risk IPAs, and he is considering terminating all 17 of the group's IPA contracts, which cover approximately 3,500 patients.
Dallas OB/GYN Gunby is not a member of GPPA, but he says he is experiencing the fallout of the bankruptcy. Gunby belongs to Southwest Physicians Associates (SPA), a 1,400-doctor IPA, which is having financial struggles of its own. SPA last month began withholding 20% of specialists' fees, and it announced in July that it would not be paying out 1998 withholds because of higher-than-expected medical bills, Gunby says. SPA President Lisa Swanson, M.D., was not available for comment.
Chuck Cook, M.D., a Dallas orthopedic surgeon and president of a 70-physician specialist IPA, says GPPA's failure has area physicians worried about accepting risk. His own IPA, Orthopedic Specialty Associates of North Texas (OSANT), has the capability to accept capitated contracts, but "we haven't found anything that's worth the risks," he says.
"There's a basic philosophy in our community now that physicians really aren't in the business of risk management," Cook says. "I think that the benefit of our organization is more in disseminating information, helping develop guidelines of efficient practice, encouraging outpatient procedures and helping the payer save money through better patient management as opposed to assuming risk."
Cook and the physicians from OSANT remain members of the Genesis Physicians Group, a sister organization of GPPA that is a traditional IPA but does not accept risk and is not party to the bankruptcy. The 1,260 physicians in Genesis Physicians Group mostly see patients from preferred provider organizations.
"I think that we'll always need the general IPA, as a coordination group if nothing else," Cook says. He described specialty IPAs as the purest form of collaboration. "I think the specialty IPA is very important to the future of managing the cost of healthcare."
Without that kind of physician buy-in and support of utilization management policies, IPAs are doomed, analysts say. To succeed at risk management, all physicians must adopt a philosophy of providing the appropriate treatment at the appropriate time in the appropriate setting, even if those decisions go against their first, and more expensive, inclination.
"I don't think all of the (GPPA) doctors necessarily bought into the risk management. Some kept doing things like they've always done, and there's just not enough money in the contract to do that," Gunby says.
Karen Miller, a partner with the Pace Group, a Dallas-based healthcare consulting firm, says it is difficult but not impossible for IPAs to succeed at risk management.
"I think the factors that need to be in place are the infrastructure to support the management of the risk (and) a system that can identify practice patterns and where your dollars are going," she says. In addition participating physicians have to be able to make hard decisions about patient care and their own reimbursement, she says.