Bankrupted intermediaries leave docs desperate’
Medical group sues over unpaid patient care
The California Medical Association (CMA) has sued eight HMOs operating in California, accusing them of avoiding their responsibility to reimburse physicians who care for insured patients.
The suit, filed in San Diego Superior Court, asks that the physicians be reimbursed by the health plans for the unpaid bills submitted to the health plans’ intermediaries, or independent practice associations (IPAs), that have gone out of business.
The decision to seek legal remedy was precipitated by the bankruptcies or closures of more than 100 physician groups in the past three years, according to a statement by the San Francisco-based medical association.
The failure of just two IPAs has led to disruptions or delays in care for more than two million people and has left physicians holding more than $100 million in unpaid medical bills, the association says.
90% of IPAs on the brink of failure
The suit comes on the heels of the release of a PriceWaterhouseCooper report projecting that at least 34 medical groups or IPAs in California will close or go bankrupt before the end of the year, and that 90% are on the brink of bank ruptcy or failure. (For details, see related story on p. 150.)
Many physicians have filed liens against the IPAs in bankruptcy court but don’t have much hope of recovering their money, says John C. Edwards, JD, of Raffee & Edwards in La Jolla, CA, one of the attorneys who filed the suit.
"Thousands of honest, hard-working California physicians are now in truly desperate straits because the HMOs are simply not paying for care physicians have provided to the plans’ own patients. This is an outrageous dereliction of responsibility on the part of the HMOs," says J.C. Pickett, MD, president of the association.
At issue is the health plans’ practice of contracting with large practice management firms that in turn contract with the physicians and are paid by the health plans to handle the reimbursement process. The intermediaries have received money from the health plans to cover their members’ medical needs, but in the cases cited in the lawsuit, the firms that have gone out of business have not paid the doctors.
The suit charges that in order to practice in an environment where 90% of patients are covered by managed care, physicians were forced to contract with the practice management intermediaries.
"It’s a practical matter in California that a physician’s access to patients and patients’ access to a particular doctor is governed by whether the doctor is part of an IPA," Edwards says.
The suit contends that California’s Health & Safety Code states that health plans are responsible for paying providers even when intermediary organizations do not. The code states that doctors must be paid within 30 to 45 days and that a provision in the contract can’t waive a physician’s right to get money from an HMO.
"Plans may choose to contract with an intermediary physician group to get the care to patients, but if one of these intermediary groups fails, state law is clear that the plans are still ultimately responsible for making sure physicians and other providers are paid for the care already given,"Pickett says.
The CMA made every effort to resolve the issue by negotiating with health plans, Edwards says.
The HMOs contend that they have paid for the patient care by paying the intermediaries.
"This makes sense if you are talking about an IPA run by physicians actually treating the patients, but to suggest that paying a corporation is the same thing as paying the physicians is a stretch that I don’t believe is realistic," Edwards says.
The plaintiffs ask that the court declare that the health plans are ultimately responsible for payments to physicians and other health care providers that have not been paid by practice management groups.
It’s not fair and it’s not proper’
The health plans have shifted all risk to the IPAs by contracting with them to act as an intermediary between the health plan and the physician, Edwards says.
"By shifting the contracts to the IPA, the health plans have removed any element of risk to themselves. When they shift that risk to the IPA, it’s not fair and it’s not proper and California law says you can’t do it," Edwards says.
Named as defendants in the suit are: Aetna U.S. Healthcare, Blue Cross of California, Blue Shield of California, HealthNet, MaxiCare Health Plans, PacifiCare of California, Prudential Healthcare (recently merged with Aetna), and United Health Care of California.
The suit argues that the HMOs have control over the IPAs and therefore have access to their management practices and finances and should have realized that the companies were on the brink of financial disaster.
Many physicians originally embraced the idea of IPAs because they reasoned that HMOs would no longer be able tell them how to practice medicine. However, Edwards points out, even if the IPA administrator is a physician, when the IPA has a profit margin to meet and dollars are stretched, an IPA might wind up making the same kinds of decisions an HMO in the same position would make.
According to the PriceWaterhouseCoopers report, California health plans pay IPAs an average of $36 out of an average $120 per-member-per-month (PMPM) premium. The IPA keeps $6 for administrative costs and profits and passes the rest along to the medical groups. Of the $30 paid to the medical groups, $17 goes for staff, rent, and other expenses, and $13 goes to physician income.
Lowest charges, highest expenses
California’s PMPM charges are among the lowest in the country, even though the state has one of the highest costs of living in the country, according to the CMA. "As long as you have a rate structure as low as it is and have two major groups trying to make a profit out of the insurance dollar, there’s not anything left for the doctors," Edwards says.
The lawsuit should bring accountability back to the HMOs, Edwards says.
"They call the shots. They decide how much to charge and how much to pay. They are no longer taking risks. They’ve driven down the cost of premiums, but it has come at a great cost to the system," Edwards says.
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