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January 25, 2013 12:00 AM

Physician practices driving ACO expansion in L.A.

Andis Robeznieks
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    Physicians are in the vanguard of developing accountable care organizations in the sprawling Los Angeles market, a new report found, with large physician practices driving the change.

    The Center for Studying Health System Change, in two studies funded by the California HealthCare Foundation, noted how practice structures for physicians in Los Angeles differed markedly from those in San Diego, which seek to expand lucrative service lines and grow their patient-referral base.

    The report found that L.A.'s small or mid-sized physician groups are joining or affiliating with large independent practice associations, which have the market clout to negotiate favorable contracts with health maintenance organizations and other payers. The large IPAs also are more likely to affiliate with multiple hospitals, a must in a market fragmented by a far-flung freeway system and glacial traffic patterns.

    Many of the more than 80 Los Angeles-area hospitals are either stand-alone entities or have aligned with one of 14 systems, none of which have carved out a dominant piece of the market, according to the report. Kaiser Permanente, with seven hospitals, has the largest market share. But it has just 11.8% of total inpatient discharges.

    The largest IPA, HealthCare Partners, contracts with some 3,900 doctors and employs 700 more. It was recently acquired by DaVita, the Denver-based dialysis provider. Heritage Provider Network has about 1,800 physicians in its IPA and employs 700, according to the report.

    Several L.A. hospitals are looking at merging or tighter affiliations, but the report noted how one environmental factor contributes to maintaining the market's fragmentation: terrible traffic. “Significant traffic congestion leads many to seek medical care close to home,” it said.

    In contrast, San Diego is dominated by Sharp HealthCare (five hospitals, according to the American Hospital Association, and 27% of inpatient discharges) and Scripps Health (four hospitals on five campuses and 25% of discharges), with Kaiser Permanente, University of California San Diego Health System and Palomar Health each having about 10% of the market.

    San Diego physicians tend to practice in large groups aligned exclusively with one hospital system, according to the report. With 850 employed doctors, the Southern California Permanente Medical Group is the largest. It's followed by the 700-physician UCSD Medical Group.

    Two local developments highlighted in the report include: Sharp's participation in the Medicare Pioneer ACO program, and concerns over whether a healthcare construction boom will lead to excess capacity and weaken some hospitals' financial health.

    The reports are based on interviews conducted with healthcare leaders in the regions last March and April, and update similar reports issued in 2008. The California HealthCare Foundation released similar reports on San Francisco and Fresno in December, and Sacramento and Riverside/San Bernardino in September.

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