In an attempt to stem financial losses, some IPAs are creating small risk pods they hope will better help them control costs and spread risk across the IPA.
Among groups trying the approach are Quincy, Mass.-based Pilgrim Independent Practice Association and Dallas-based Southwest Physician Associates.
Ironically, these organizations are following a model pioneered by North American Medical Management, a division of Nashville, Tenn.-based PhyCor, which has had its own financial struggles.
The philosophy behind local risk units is that member physicians still gain the benefits of large group contracting, have smaller levels of bureaucracy to deal with and gain the ability to make their own policies and control their budgets.
"The problem with these large IPAs is there's no culture and no sense of community amongst the physicians," says James Robinson, a health economics professor at the University of California, Berkeley. "It's just a sprawling entity, therefore the physicians don't view the other members as a group with which they wish to tie their fates. The advantages of breaking down the physician entities into smaller and smaller groups is to have a sense of culture and community."
The 1,400-physician SPA announced that it is forming a new physician organization, SPA Medical Management Group, that will only accept risk contracts for about 700 physicians. SPA will continue to handle fee-for-service and PPO contracts for SPA physicians, but members who want to accept capitation must join the new organization and then team up with other members in small risk-bearing units, which SPA refers to as medical management units. SPA is managed by PhyCor's NAMM.
SPA Board Chairwoman Lisa Swanson, M.D., says the IPA membership was split on the benefits of accepting risk, and some didn't want anything to do with capitation.
Physician participation is voluntary in SPA's plan, but in Massachusetts, physicians have no such choice. Pilgrim IPA, a 12,000-physician IPA that contracts with Harvard Pilgrim Health Care, announced earlier this fall that all member physicians must join an existing local risk unit, form their own or be terminated from the IPA.
About 7,000 of PIPA's physicians already belong to local risk groups. The other 5,000 physicians belong to one large risk group known as the PIPA 01 Contract, which contracts with Harvard Pilgrim on a discounted fee-for-service basis.
About 1,000 of the PIPA 01 physicians are affected by the new policy; the rest are hospital-based physicians or members of units up for sale.
Harvard Pilgrim spokesman Alan Raymond says the shift in focus is part of the insurer's financial turnaround plan: Harvard Pilgrim lost $54 million last year and $75 million through the third quarter of this year. The PIPA 01 Contract cost Harvard Pilgrim about $15 million last year.
"We feel physicians practicing in groups are more focused on managing costs and managing the quality of care, and that we can work more effectively with them in groups," he says.
Frank Forten, spokesman for the Massachusetts Medical Society, says that area physicians understand that Harvard Pilgrim is struggling but do not think recovery should come at the physicians' expense. Forten says that the insurer hasn't given physicians enough time to do such things as establish a business and governance structure and get stoploss insurance.
"You're essentially walking people off the plank without any opportunity to save themselves," he says.
Another concern Massachusetts physicians have, Forten says, is that under the new risk contracts, primary-care physicians may only refer to specialists in their own local risk units. "This will be disastrous for specialists," he says.
Salem, Mass., internist Scott Kerns, M.D., is a member of the PIPA 01 Contract and says he has no interest in joining a local risk unit. One reason is the local risk units do business at hospitals where he does not have privileges.
Norman Chenven, M.D., CEO and president of Covenant Management Systems in Austin, Texas, suspects Kerns is not alone, and physicians will not make the transition to risk pods smoothly. Chenven oversees several Texas IPAs and is chair of the Texas Medical Association's Forum for Physician Led Organizations.
Chenven says, "My fear is that you can't hop from one model to another that abruptly in a business this complex and this difficult."