Hoping to secure better managed-care contracts, many physicians have grouped in independent practice associations, but many of these organizations are struggling to survive.
Now efforts are underway to find the causes of the financial problems and whether there's a future for IPAs, which just a few years ago were seen as a form of virtual integration that would allow physicians to regain control of healthcare.
One recent study that attempted to pinpoint the problems found the top culprits include lack of good management information systems, poorly negotiated contracts and undercapitalization. The findings were drawn from 114 IPA survey respondents and released at The IPA Association of America's annual meeting in Las Vegas last month.
The inquiry was completed by a task force created last May by TIPAAA.
The American Medical Association estimates there are about 1,000 IPAs across the country, linking physicians in individual offices to provide managed-care contracting.
IPAs contract with health plans and pass capitation payments (minus a cut for administrative services) to its member practices. But many question whether IPAs are as prepared for risk as they think they are.
Survey respondents were asked to rank 11 factors most commonly believed to contribute to financial problems among IPAs. They ranged from poor relationships with area HMOs to excessive IPA administrative costs.
The top reason for failures, the survey found, was lack of management information systems needed to assess and manage risk, analyze practice performance, and project trends. Stacy Mays, task force chair, said the importance of information technology is helping organizations "understand what you are at risk for" when they contract to provide managed-care services.
Sandy Lutz, a Dallas-based consultant with PricewaterhouseCoopers, which helped prepare the data, said the situation creates a "vicious circle: lack of good (information) systems leads to bad contracts, which means you can't raise money."
Poorly negotiated contracts ranked second and undercapitalization ranked third, although lack of capital was higher on the radar for larger IPAs, particularly those providing care for 30,000 or more enrollees.
When the survey broke out responses from IPAs that actually had failed, leadership ranked as the fourth most significant contributor to financial difficulties, while among IPAs overall it was viewed as seventh most important.
Unrealistic physician compensation levels was ranked as the fourth-highest reason overall, although it ranked fifth among failed organizations.
Although no data exist on the exact number of IPA failures, the California Medical Association has reported that 90% of the state's IPAs are in financial disarray. Last summer, CMA reported that 115 of California's large groups and IPAs have gone bankrupt or closed in the past three years and predicted continued failures.
Also, the collapse of MedPartners Provider Network and FPA Medical Management left $100 million in unpaid bills in California last year.
However, James Robinson, professor of health economics at the University of California at Berkeley, cautions against overreaction to reports of IPA problems that he argues have been small in number, in spite of a great deal of media attention.
"There is clearly financial frailty, but it is not limited to IPAs," he says. "Others who are stressed include hospitals, nursing homes . . . in fact, who isn't stressed?"
He adds that lots of IPAs have overreached themselves and now are in retrenchment mode. But he says he doubts that the problems are as extensive as the CMA and other medical organizations have suggested.
"I can think of maybe three IPAs, certainly fewer than 10 that have had problems, but not 100," he says.