President's Page March 2003
by Frank Randolph, M.D., President

CLEANING UP MEDICAL FINANCIAL CATASTROPHES-WHO DO YOU TURN TO?

Recently, our society organized a town hall meeting to discuss the fall-out from the closure of Inland Global Medical Group (IGMG). This closure impacted many of our members and their patients in a manner that is embarrassing for our profession and our state. Fifty-five physicians gathered on January 14, 2003 at San Antonio Community Hospital's auditorium for this meeting. I convened the meeting, assisted greatly by our executive director, Linda Stratton. Linda and Dr. Victor Ching, an SBCMS board member and past president, had been busy for months trying to help local members with various problems dealing with this IPA's closure. Dr. Jack Lewin, CMA's CEO, Catherine Hanson, Esq., CMA's Vice President & General Counsel, and Elizabeth McNeil, CMA's Director of Regulatory Advocacy have greatly helped SBCMS and our physicians in this process. Catherine and Elizabeth also came down to help inform our members and answer questions at the town hall meeting. They were joined by Joy Higa, Director, Provider Health Plan Relations for the California Department of Managed Health Care. Together, we rehashed the events, and developed a strategy for continued efforts to heal the damage resulting from the closure of IGMG. Following the town hall we conducted a survey among the IGMG physicians and obtained more detailed information that will help us more effectively advocate for these physicians. We tabulated the survey results and forwarded it to the DMHC. Joy Higa made a commitment to the physicians at the town hall meeting to review and resolve these issues.

IGMG closed their doors on September 24, 2002 due to financial insolvency. Over 48,000 patients were involved and 240 physicians were left with $5.7 million in unpaid bills. Patients were transferred to different groups and IPAs. On September 26th CMA/SBCMS sent a broadcast fax to IGMG physicians advising them to contact each contracting health plan to verify the status of their patients and the effective date of transfer. CMA/SBCMS advised physicians to contact the health plan for authorizations for treatment provided during the transition period, and to verify the status of authorizations obtained from IGMG. We encouraged physicians to contact their patients and inform them how they can remain with the physician through contracts with different IPAs, groups or health plans. Nonetheless, the health plans transferred the patients from IGMG physicians. Health and Safety Code §1373.96 allows patients with acute and serious chronic conditions the right to continue to see their physicians for up to 90 days or longer if necessary. Unfortunately, these sick patients were transferred to other physicians.

For services provided prior to September 24, 2002, CMA/SBCMS advocated with Inland Global Medical Group, San Antonio Community Hospital, the health plans and the Department of Managed Health Care to secure payments for physicians. For services provided after September 24, 2002 and prior to October 1, 2002, CMA/SBCMS recommended that physicians contact the health plans and obtain prior authorizations for services and payments, for services provided until October 1, 2002. Unfortunately, the IGMG physicians were never paid for these services.

Most of the physicians involved in the IGMG insolvency have lived through the MedPartners and Global KPC insolvencies. IGMG was owned in part by Dr. Kali P. Chaudhuri. The health plans have reserve accounts (from this group's cap payments) totaling nearly $1 million.

On October 4, 2002, an involuntary Chapter 7 bankruptcy petition was filed against IGMG. An involuntary bankruptcy can be a valid tool for creditors to ensure repayment of their claims. San Antonio Community Hospital loaned IGMG several million and they are the first creditor in line. The physicians are unsecured creditors.

CMA continues to work diligently with the health plans to release the reserves and/or Letter of Credit funds to IGMG. For example, Aetna is currently holding approximately $400,000 in reserves with IGMG. In December, CMA successfully negotiated the immediate release of $100,000 of these funds. The funds have not been released as we are continuing to work with Aetna's legal department to arrange for the funds to be released "in trust" to the physicians. PacifiCare is holding approximately $225,000, as a security deposit to cover three months of IBNP (incurred but not paid) liabilities for PacifiCare members. PacifiCare has already drawn on the entire amount and that there are no additional monies to release to the physicians. PacifiCare claims that this money went to cover continuity of care claims resulting from the transfer of PacifiCare patients to new groups, as well as to pay non-contracted physicians. PacifiCare says that they have already paid more than $1 million for these claims. Cigna is currently holding an estimated $215,000 in the form of a Letter of Credit; Cigna has not yet responded to a CMA request to release the funds. The amount in reserves being held by Blue Cross (BC) is $50,000. CMA has asked BC for an accounting of the funds. Health Net did not require the establishment of reserves or a LOC from IGMG.

Why are these catastrophes occurring? Will it happen again? What can we do to prevent such disasters?

More than 125 medical groups have closed or gone bankrupt since 1999. Six health plans control more than 80% of the market. Such enormous market power allows them to offer inadequate payment rates and unreasonable contract terms. California health insurance premiums are at least 40% below states with similar cost of living. Private capitation rates are more than 24% below the national average. Rates declined more than 55% between 1993-1999. These rates are market driven rather than based on the actuarial cost to provide care.

Is the money going to physicians? No. Physician operating costs increased between 6-10% per year in 1990s. California physician income declined by 11% between 1995-97 and was 14% below the national average. Physicians cannot negotiate on a level-playing field. A recent CMA physician survey found that 43% physicians plan to leave medical practice in the next 3 years. Another 12% will reduce their time spent in patient care. 58% of physicians have experienced difficulty attracting other physicians to join a practice. Low reimbursement, managed care hassles and government regulation are the greatest sources of physician dissatisfaction. More than ¼ of physicians would no longer choose medicine as a career if starting over today, and more than 1/3 of those who would still choose medicine would not choose to practice in California.

CMA and county medical societies may be able to help somewhat but with the intended reduction in both Medicare and Medi-Cal planned by our federal and state governments, the funding picture will continue to worsen. New California laws may help, such as AB 2420 (prohibits health plans from passing injectable risk on to physicians), or AB 2907 (health care provider bill of rights, reduces a number of unfair contract amendments). Yet such laws do not increase public funding, nor do they give physicians the right to collectively negotiate to drive up employer funding of healthcare.

What is the solution? I am not sure what to do exactly, but I am sure what not to do. Walking away from the playing field is not the solution. If ever we needed each other, this is the time. If we think we are important to our patients' welfare, we cannot shrink away. Our efforts to confront the health plans or the government in the media, in the courtroom, or in whatever forum necessary to develop solutions must be doubled. This cannot happen without an increase in statewide physician involvement. We can fix these problems but we need to get serious in our efforts and wake up the citizens of this state to the notion that physicians are committed not only to delivering the best care but to a fight for that privilege and the respect that goes with it. This is not just about our salaries-it is about the very infrastructure of our health care system. When the going gets tough, the tough get going. Are you tough enough to stay in the profession? Pay your dues and belly up.

Frank Randolph, MD