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California is clearly headed for a crisis
in access to physicians. Not only have the pressures of managed
care hit the physicians hard, but the old structure of the solo
physician entrepreneur is dying. Based upon our interviews with
physicians and review of recent data, it is becoming clear that
many new physicians do not want to start a practice but want a job
so they can focus on the clinical aspects of care and not be
burdened by the risk of managing a business. As this change has
evolved, some communities in California are beginning to experience
access problems because many physician groups do not have a
structure to offer new physician a job and because of the high cost
of living, of starting a new business and of buying into an
existing practice. Physicians are going to organizations that can
offer them a job and stability. Because there are few succession
plans for physicians who are near retirement, access to Physicians
is reaching a crisis not only in traditional areas like rural and
underserved communities, but also in some of the most affluent
communities in the state where physicians can not afford to
purchase a home based on the income they can obtain from
traditional compensation model.
Many retiring physicians in community
hospitals in California are discovering that there is a dearth of
interested buyers for their practices and in some cases there is
nobody who will take over the practice and care for the patients at
any price. This has resulted in fewer choices in some communities
for patients seeking new physicians. The scarcity of physicians in
some communities is causing extended waiting periods for patients
seeking care. Frustration with the current system has resulted in
some physicians and their patients moving to Kaiser Permanente and
other integrated groups where they can obtain stable work like Palo
Alto Medical Foundation.Last year
Kaiser Permanente recruited over 500 new physicians in Northern
California alone. Almost half of these physicians were "refugees"
from small groups and solo practices who were frustrated with the
current managed care system and were looking for stability and a
place to work that is viewed by some as more friendly to Primary
Care Physicians. Kaiser was viewed in the past as a low quality
option. This opinion has been changed among patients and physicians
alike. While not perfect, Kaiser offers significant advantages to
the current problems that face the non-Kaiser healthcare market.
The Permanente Medical Group has attracted many of the recent
graduates and has required their new physicians to be board
certified.
Access to physicians is quickly reaching a
crisis in some of the urban communities in the state where
physicians cannot afford to purchase a home based on the
traditional compensation model. The average cost of a house in
California is 38% higher than the national average. The difference
is greater in some communities. The cost of living is 36% higher
than the national average. The average income of solo and small
group practice physicians is 23% less than the national average.
This significant and growing difference makes it increasingly
difficult for communities to recruit new physicians. This
difference is more pronounced in some communities where the cost of
living is significantly higher and the penetration of Managed Care
is higher. Many communities that have an under supply of
physicians, have had to offer income guarantees and housing
assistance to get physicians to open a practice.
How
this may affect your community
It is our belief that the aging of the
physician population and the lack of succession planning may result
in significant access problems for patients in the next few years.
Hospitals that do not have a plan for addressing these issues are
finding themselves increasingly vulnerable to physician shortages
that can significantly affect admissions.
Recent studies have
indicated that there is an over all adequate supply of physicians
but when you look deeper into the numbers and talk with the
physicians currently in practice you see a significant problem in
some communities. Physicians frustrated with their compensation and
with the pressures of managed care are dropping out of IPA's and
other managed care plans. They are limiting their practices,
closing their practices to new HMO patients and retiring earlier
than expected. If you study this from the patient access
perspective we are finding significant waiting periods for
physician office visits. In some cases patients are being asked to
wait up to 2 weeks for routine care and 8 months for a physical
exam.
In working with
hospitals, we know that many are frustrated with their failed
efforts to help physicians. At the same time many hospitals
understand that measures are needed to stabilize their physician
community to provide for the care of their patients. Hospital also
understand that they must play an active role in assisting the
transition of retiring physicians leaving and new physicians coming
to their community. They are willing to help, but they do not want
to be a "blank check" for the physicians and they do not want to
destroy the incentives for the physicians to build strong
practices.
Why
integrated groups like Permanente and PAMF are
winning.
Integrated groups
provide a PCP-friendly environment with better pay, more stability,
better call arrangements, better retirement and housing support.
This gives physicians more control of patient care. These groups
have a higher ratio of PCPs resulting in PCP dominated model. PCP's
are paid more in integrated groups and specialists are paid less.
Integrated groups have a system for managing care with the use of
NP's and other physician extenders allowing physicians to focus on
the sickest patients and to leverage their services and time in a
more efficient and effective way. Integrated groups also have a
seniority system that compensates physicians for their experience
and stability.
Community hospitals
that have failed at previous attempts to build integrated groups
are forming transition clinics. These clinics are formed as
departments of a non-profit hospital under 1206a or 1204d of the
Health and Safety Code. The hospitals are allowed to establish
these clinics to assist physicians who are retiring and offer them
payment for time worked. These groups do not pay for "goodwill" and
do not pay salary guarantees. They provide a stable transitional
group that helps the physicians while providing access to care for
the public.
Succession Planning
In the past, attempts
by hospitals to manage integrated groups have failed primarily
because they have attempted to control and mange these groups.
Hospitals attempting to compete with for-profit physician
management companies overpaid physician practices and placed them
on salary guarantees, which removed their desire to work hard.
Hospitals are learning from these past experiences and are
recognizing that the current threat to their viability is their
lack of a structure to hire physicians and of the consequences of
physicians retiring without succession planning.
Hospitals should
analyze what makes integrated groups successful and create an
environment that will encourage these groups to flourish. Hospitals
can encourage and help sponsor integrated groups, but should not
attempt to operate or control them. They need to assess how they
can become competitive in today's environment and evaluate how
vulnerable their primary care base is to erosion. Hospitals need to
be proactive in evaluating when physicians will retire or when
practices will be transferred and develop a succession plan for
these physicians and practices.
While hospitals
should avoid managing these groups, they need to establish linkages
with the Physicians to maintain their referral base. Hospitals can
assist with infrastructure support to the Physicians. They have
many legal ways to help Physicians with recruitment, housing
support, billing support, and preferential capitation payment
arrangements. These are not steps that are easy for hospitals to
take, but if they are going to assist their Physicians they need
ways to help them make this transition.
Kaiser Permanente in
Northern California poses a current threat to many hospitals here
because they have begun to recruit non-Kaiser physicians. In
Alameda for example, Permanente recently recruited 11 of the 16
PCP's in that community. This group moved to Permanente and is
moving their patients to Kaiser. Permanente also allowed the
physicians to continue to see their Medicare and Indemnity
patients. This change in their approach poses a threat for many
hospitals.
The recent issue of
financial solvency reports for Medical Groups in California by DMHC
has highlighted problems with some marginal IPA's. The physicians
in these groups are also having difficult problems. As these IPA's
are forced to solve their financial problems, many of them will not
survive. Since the physicians are often the largest creditors they
will be hurt the most when these groups fail. As many of the PCP's
are capitated, their movement from capitation to Fee-for-Service
payment will put an added cash flow strain on these already weak
practices. Some of the stronger groups are growing from these
changes and in some cases they provide a cash flow advance to help
with this transition.
Kaiser has also
benefited from this change. As the patients and the physicians look
for more stability they are increasingly looking to Kaiser. Some of
the integrated group practices and foundations have picked up some
of this volume, but these do not exist in many communities. Some
IPA's have been successful is providing stability and a good
practice structure, but many are experiencing financial
difficulties.
Why you must do something now
We are concerned that
hospitals have become frustrated and complacent with these trends.
They know that this may result in health care access problems in
the future, but they are not willing to make this a priority now.
We believe that hospitals that continue to ignore this issue will
eventually end up with physician shortages, which can negatively
impact admissions and ancillary services.
We encourage
hospitals to assess these issues and to develop succession plans
for all of their physicians. We have worked with several hospitals
to help them make these assessments and have developed the
following list of Do's and Don't for work in this area.
Do's and don'ts for Hospitals trying to help physicians
Do's
- Invest hospital
capital dollars in physician successions planning
- Develop a succession
plan for each of your physicians and practices
- Evaluate the health
of your medical community. Know the retirement plans of your older
physicians
- Build linkages with
your physicians with Information System infrastructure
- Assist with physician
recruitment programs including; paying for recruitment and
providing income guarantees for the first years and housing
assistance
- Support the
documented needs of both PCP's and Specialists
- Support independent
but interrelated linkages (like Kaiser and Permanente)
- Help practices with
practice evaluations and management support
- Reduce your
dependence on solo and small practices, help to build stronger
groups
- Consider establishing
a Division that is focused on physician relations
- Evaluate the hospital
and medical group contracts to maximize compensation
- Assist the physicians
with training on the latest coding and billing
techniques
- Support medical
groups that support PCPs
- Consider
hospital-based community clinics or foundation models
- Sponsor adoption of
new technology to better manage care and integrate the community
services you provide
Don'ts
- Don't pay for
goodwill
- Don't give blanket
salary guarantees
- Don't try to control
or manage practices, help groups to manage themselves
- Don't try to change
solo physicians into group practice physicians.
Walter Kopp is the
President of Medical Management Services, a healthcare consulting
group in San Anselmo, California. He has worked extensively with
many medical groups and health systems to anticipate the coming
changes in our healthcare system and to help physicians and
hospitals to deal with these changes. He can be reached at
 or call: (415)
457-5023
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