Brown & Toland Medical Group officials say running the San Francisco Bay Area's largest IPA more like a business has helped it go from being $10 million in the hole to being $10 million ahead.
But the biggest challenge going forward, says CMO Tom McAfee, M.D., is polishing the tarnished trust of the IPA's 1,600 physicians.
McAfee says the irritants that doctors have found unsettling run the gamut: shrinking paychecks despite skyrocketing costs; drained resources from tentacles stretched beyond San Francisco late in the industry's expansionist period; and a nerve-rattling climate wherein as many as 70% of California IPAs have slipped into insolvency.
B&T is taking steps toward restoring physician confidence, McAfee says, including upping reimbursement July 1 by an average of 6%. It is also conducting question-and-answer meetings intended to enhance communication between administration and rank-and-file doctors. "But we have a lot more work to do," he says.
The administration likely kept the organization going by communicating--rather than hunkering down in their bunkers--and providers' grumbling has lessened, says medical director Fred Whinery, M.D. "But it has not been replaced with contentment. Reimbursement remains the No. 1 problem."
Whinery says the July increases merely restore 1999 levels, despite rent and labor costs driven skyward by the dot-com boom. The resultant squeeze has prompted many to move practices to more temperate financial climes or quit medicine altogether. "There's a lot of demoralized people here," Whinery says.
Gloria Austin, CEO of subsidiary Brown & Toland Physician Services Organization, says the planets are aligning for the multispecialty network with 252,000 enrollees through improved business tactics. These include aggressively recouping losses from previous years through reinsurance and long-overdue accounts receivable; plowing proceeds into the organization instead of divvying up the harvest at year's end; concentrating on the San Francisco market; increasing hospital affiliations; relying on savvy negotiators to net double-digit reimbursement gains; entering single-year rather than multiple-year contracts as a hedge against medical inflation; and employing technological advances triggering a 17% dip in administrative expenses.
Jack Lewin, M.D., CEO of the California Medical Association, says ratcheted caps spurred B&T's financial ascent. "It reflects a trend toward increased capitation rates for those groups that are big enough and have enough geographic domination to negotiate with some clout."
But other well-managed IPAs are failing due to woefully insufficient capitation rates, Lewin says. "If good groups are underfunded and can't make it, the plans need to understand nobody can make it."
Curtis Terry, Blue Cross of California vice president of network services for Northern California, says B&T particularly gained ground by pulling out of San Mateo County, Calif., in late 1999, Hawaii in December 2000, and the Modesto, Calif., area on July 1, 2001. "They've really focused on their core market and service areas: San Francisco and immediate environs."
From Terry's perspective, B&T's refocus is part of a broader move in the marketplace: IPAs that overextended themselves geographically have trimmed losses and created more cohesive groups by retreating into appropriately sized venues over the past two years, thereby ridding themselves of the costly task of managing widely diverse groups with often-incompatible medical cultures.
Rising premiums also have alleviated some economic pressure for providers and plans, Terry says, and those on both sides are simply improving their game with practice. "Everyone has become better at what they do, and the ones that didn't have dropped out."
Palo Alto (Calif.) Medical Foundation has 460 physicians and 500,000 patients and also is in the Bay Area market. But the foundation is not-for-profit and therefore shoots only for a modest margin, says President and CEO David Druker, M.D., a dermatologist.
Still, Druker says, the foundation suffers similar slings and arrows such as access and service issues as its IPA counterparts. Many physicians are retiring early, and recruiting replacements is problematic because Palo Alto is "ground zero for real estate in the world." For years, compensation for the foundation's physicians remained flat, though many received "meaningful increases" in early 2001, he says.
Druker says PAMF has retained earnings for the past 10 years. "All the money doesn't go to the doctors' pockets. There's a certain financial discipline that some groups don't have."
Another advantage PAMF enjoys is being in business since 1930, Druker says.
"Other groups don't have the history and culture that some of the older groups do. It's one thing to say you're a group practice; it's another to act like one--for example, willingly supporting primary care. Those are the kind of issues we've grappled with, but it's real hard for physicians that aren't used to it. It doesn't happen overnight."
Druker is looking to technology to buoy physician organizations, and the foundation is making a multimillion-dollar investment in an electronic medical records project toward that end. "Hopefully, technology's going to get us out of all this."
Technology was crucial in driving down B&T's costs, McAfee says (see November 2000, page 52). "That's where the next gains are going to be. It's not just getting double-digit increases from health plans year after year, it's analyzing risk and refining medical management with technology."
Infectious disease specialist Richard Dixon, M.D., of San Francisco, a former medical director of the National IPA Coalition, says he believes most existing IPAs are viable. "Popular perception always lags reality, and while many sorts of gurus and futurists and opinion leaders were saying IPAs were dead, I think the model will persist," he says.
California's Department of Managed Health Care will be keeping tabs on IPAs to ensure minimum solvency requirements. "One of its first tasks will be to figure out what organizations are out there and educate them about fiscal responsibilities," Dixon says.
Yet without an upswing in capitation rates, CMA's Lewin predicts, the next two years will bring another wave of IPA insolvencies in California. "We'll have rolling medical blackouts instead of just electrical ones."
Linda Boone Hunt is a Prescott, Ariz.-based investigative reporter and feature writer.