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How IPAs are changing


With the decline of capitation, IPAs are seeking new roles in order to remain relevant. What will their choices mean for you?


How IPAs are changing

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Choose article section... Clinical integration: Can it work? A Wisconsin IPA checks up on doctors A Texas IPA returns from the brink of death A Massachusetts IPA reinvests bonuses Capitation still works on the West Coast

With the decline of capitation, IPAs are seeking new roles in order to remain relevant. What will their choices mean for you?

By Ken Terry
Senior Editor

As capitation has declined across the country, IPAs have fallen on hard times. The number of these organizations—many of which were formed to negotiate and manage risk contracts for physicians—has dropped from about 3,000 in the late '90s to 2,200 today. Yet nearly half of all US physicians still belong to them, says Albert Holloway, president of the IPA Association of America.

Will that percentage hold up? In California, where most IPAs are still taking financial risk, they contribute a major portion of physician revenues. Elsewhere, says Holloway, many IPAs are "downgrading their contracting and putting more effort into member services." Among these are group purchasing of supplies, malpractice insurance, and health insurance; facilitating online connectivity with payers for eligibility, claims status, and the like; credentialing; billing; and providing help in complying with government regulations, including HIPAA and OSHA.

But are these services valuable enough to justify IPAs' continued existence? For many physicians, the answer is No. "If an IPA can't bargain for better terms, physicians say, 'Why pay the membership fee?' They feel in most cases, they can get the same contracts on their own," says Gary Matthews, an Atlanta consultant.

Amid the rubble of managed care, however, a number of IPAs are thriving, and some have clawed their way up from bankruptcy to take their place among the survivors. The approaches of these IPAs vary from one market to another, but they all have one common denominator: They're trying to leverage their collective strength to improve the lot of physicians. Here's how some IPAs are doing it.

Clinical integration: Can it work?

IPAs' best bet to stay relevant may be in creating clinically integrated networks that can bargain collectively for fee-for-service contracts. Last year, in a staff opinion letter, the FTC gave cautionary approval to a Denver IPA's plan to negotiate fee-for-service contracts collectively.* That approval was based largely on the assertion that clinical integration of physician-members' offices would improve patient care and lower costs.

Some observers doubt that independent physicians can ever achieve sufficient cooperation to reach this goal. But others point out that physicians in every capitated IPA agree to practice by the same rules. A few IPAs have even learned how to do this without having risk contracts.

One example is Kids First, a 170-doctor pediatric IPA in Atlanta. While many of its capitated brethren went down the drain, Kids First survived because it had only fee-for-service HMO and PPO contracts. And because of the clinical integration of its practices, the IPA has been able to get its members better terms than they could on their own. It currently holds 16 contracts. Fees from one of the large insurers are 13 to 15 percent higher than those outside the IPA; those from another big plan are 3 to 5 percent higher.

Pediatrician Norman "Chip" Harbaugh Jr., president of the seven-year-old IPA, says 60 percent of his own business comes from Kids First. That's typical among the IPA members, who pay $200 a month each in dues.

The clinical integration of Kids First includes common forms used by every practice for checkups, ranging from neonatal and well-baby exams to adolescent physicals. The physicians have also agreed on protocols for most of the conditions they see regularly. Moreover, the IPA recently evaluated electronic medical records and recommended specific products to its members.

Several practices that have already acquired EMRs use the Kids First checkup forms as the basis for their EMR visit templates—a procedure the IPA hopes will be followed by other practices. That would allow the IPA to monitor compliance with practice guidelines.

Kids First claims it has already improved certain kinds of care. A study done through the state chapter of the American Academy of Pediatrics, says Harbaugh, showed that the IPA's immunization rate was 94 percent—far above the national average.

A Wisconsin IPA checks up on doctors

Like Kids First, the Independent Physicians Network in Milwaukee doesn't have risk contracts, but has a high degree of clinical integration. Four health insurers have delegated medical management to the IPA, while paying the physicians on a fee-for-service basis. The plans and the IPA agree on fees, and the physicians accept them as a condition of remaining in the network. They also have to practice cost efficiently. In return, they get better financial terms than they could individually, says Charlette Heyer, the IPA's executive director.

WIPG credentials the physicians and keeps close tabs on what they're doing. By tapping the insurers' claims data, the IPA can see how each doctor's utilization varies from that of others in his specialty. IPA medical directors visit primary care doctors annually and specialists every other year to discuss their practice patterns. If an inappropriate pattern of care is detected, a physician might get a visit sooner. That's what happened, for instance, when WIPG discovered one doctor was doing throat cultures on all patients and bringing them back for followups.

The IPA also obtains lab and pharmacy data from the insurers. "Using the diagnosis code, we can pull up names of patients who've had heart problems and cross-reference that to pharmacy data to make sure patients are getting preventive medications," says Heyer.

But she adds that doctor-members have clinical autonomy. "We've enabled them to get back to practicing medicine and making decisions on behalf of their patients. I don't make those decisions, and I don't have any nurses here who do."

The IPA's nearly 1,000 physicians apparently don't resent this supervision. One reason may be that they pay no dues; it's the plans that support the IPA financially. The 19-year-old IPA also offers many services. IPA members get significant discounts on malpractice insurance because of the network's thorough credentialing, says Heyer. And the IPA has an electronic communications system that practices use for online referrals, eligibility checks, supply purchasing, and interoffice communications.

A Texas IPA returns from the brink of death

Four years ago, a disastrous capitation contract drove Dallas' Genesis Physicians Group into bankruptcy. In 2002, Genesis settled with the FTC after an investigation of alleged price-fixing. Still, over the past year, 75 physicians have joined the IPA, increasing its membership to 1,325. Each primary care doctor pays $125 a month, and each specialist $200. These facts suggest that the network is doing something for its members that they find valuable.

Since Genesis is prohibited from negotiating financial terms with health plans, IPA President Ron Lutz can't be sure whether members are getting better rates than they could by themselves. But he's heard that they do, and one reason may be the non-financial deals that the IPA has struck with some payers. Under these partnership agreements, says Lutz, the IPA works with payers on projects. For example, Genesis might offer to explain to its physicians how they should bundle visit codes for a payer. Or the IPA might ask certain specialties to agree on protocols that improve care. The IPA won't enter partnerships with plans that pay very low rates, says Lutz.

Another service that Genesis provides its physician-members to help them get better deals is a Consumer Reports-style comparison of insurance contracts. The IPA identified 70 standard contract elements and put them on a grid. While the IPA can't publish each plan's rates, it categorizes them as low, average, or high. Lutz says physicians frequently refer to these reports before signing contracts.

Genesis also offers online supply purchasing and contracts for many other services, from computer support to transcription. And it's moving rapidly toward clinical integration: Eight specialties have already developed protocols, and the IPA hopes to double that number by year's end. It's also planning to provide lab results over the Internet.

"This is what IPAs should be about," says Lutz. "Focusing only on arguments about contracts and claims is the past. Although we still have to do that, we're planning for the future."

A Massachusetts IPA reinvests bonuses

Some IPAs are still taking risk, but not necessarily through capitation contracts. Physicians of Cape Cod, a 300-doctor IPA based in Hyannis, MA, holds risk contracts that require insurers to pay its members fee for service. If the IPA's medical costs are under budget for the year, the insurer pays it the difference; if expenses exceed the target, the organization might have to send the payer a check. So far, the four-year-old IPA has met its targets and received substantial surpluses, as well as quality awards. The IPA invests much of the surpluses in infrastructure that helps the organization manage risk.

For instance, the network recently spent $400,000 on a Web-based referral system.** Whether a referral is approved or denied, a message instantly goes to the specialist's Web page on the IPA site, where a staffer can pick it up. If the specialist is out of network, he receives a fax or e-mail the same day. That way, the patient can be assured that the referral will be there when she arrives. The system also benefits primary care offices by preloading demographic data, so all that staffers have to fill in is the reason for the referral.

Implemented in January 2001, the referral system has more than paid for itself, says Paul Brough, the IPA's executive director. On one contract alone, he says, the IPA received a seven-figure increase in its surplus last year, which he attributes mainly to better referral management. Since doctors have to pay a $200-per-month penalty if they don't use the system, everyone in the IPA is using it now.

Internist William N. Fenney, the IPA president, acknowledges that some physicians opposed reinvesting surpluses in the IPA. But despite the amount that's been plowed back into the organization, he figures he's making more from the IPA contracts—which account for 15 percent of his business—than he could if he dealt directly with the plans. "We have value as a group," he says. "As individuals, we have less and less."

Capitation still works on the West Coast

A few years ago, low capitation rates were killing many IPAs and physician groups on the West Coast. In the San Francisco Bay area, recalls pediatrician James A. Ferrara of San Mateo, CA, the only IPAs that endured were those that had a strong group culture and the participation of most doctors in their area.

Ferrara belongs to one of the surviving IPAs—the Mills-Peninsula Medical Group. He receives 35 percent of his practice income from the IPA's capitation contracts, and some of the other offices in his 17-doctor group get half of their revenues from MPMG.

If the physicians didn't belong to the IPA, they could still get primary care capitation contracts. But only big groups like MPMG can take full professional risk, which offers the doctors a crack at larger bonuses. Ferrara also feels the arrangement gives the physicians more control over patient care.

It's increased their Web capabilities, too, says internist Brian Roach, president and CEO of MPMG. "Physicians now have Internet access to claims data, authorization data, eligibility, enrollment, and copayments. We're looking to extend that to referral submissions this year." Lab results, already available by dial-up, will also go on the Web this year, he adds.

Still, it's been difficult to invest surpluses in the IPA's information system, even though capitation rates have risen significantly in recent years. That's partly because IPA members are still hurting economically. California's solvency standards for IPAs also require large cash reserves, and MPMG is considered a taxable medical group. So anything it doesn't distribute to physicians is taxed at an effective 45 percent rate.

What would happen to MPMG if capitation shrank or disappeared? That could possibly spell the IPA's doom, says Ferrara. On the other hand, he adds, the IPA's culture—the glue among doctors who've learned how to work together—"might prove to be the basis for the formation of a more integrated group. That could provide a lot of value down the line if it could contract with HMOs and PPOs. A good integrated medical group has the ability to provide more streamlined care. That could be the next evolution."


*See "The Feds ease antitrust rules—cautiously," June 21, 2002.

**For more information about MedVision's QuickCap system go to www.medvision-solutions.com.


Ken Terry. How IPAs are changing. Medical Economics Jun. 20, 2003;80:52.

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