IPA Woes in Dallas
When the 960-member Genesis Physicians Practice Association filed for bankruptcy protection in 1998, the independent physician association could report only a ballpark figure of what it owed in liabilities. Genesis announced it was unsure of the full extent of the dollar damage, so it wasn't a great surprise that many of the physician members were in the dark about the financial avalanche descending on their practices.

That November, 1400-member Southwest Physician Associates split to accommodate members who no longer wanted to accept capitated contracts after losses to HMOs mounted. SPA was fortunate enough to get financial help from its management company and the insurance companies it serves. And to stay afloat, those physicians who continue with capitation will contribute money of their own-$900 to $1200-in the form of an "annual fee."

According to industry observers, these struggling IPAs may prove only the tip of the iceberg here as more sail into troubled financial waters. And the least prepared for the Titanic collision are the physicians who signed on with the IPAs, who collectively have millions of dollars in fees on the line.

It's typical for payers to be placed on notice, says Sue Monaco, a healthcare attorney with Thompson & Knight, but physicians in the IPA usually are the last to know. "Physicians on the same side of the table don't have a clue," she says.

Damage Mounting Across the Country
Nationwide, the worst wreckage in the IPA business has been in California. To date, 115 IPAs and physicians groups have filed bankruptcy and the California Medical Association expects a jaw-dropping 90 percent will go belly up.

"It's wreaked havoc," says Hobart Swan, CMA spokesman. Two of the biggest cases involve several thousand physicians scrambling to retrieve $120 million owed them. Individual physicians were owed $70,000 to $100,000, with some medical groups estimating seven-figure losses.

The fallout has hit many physicians hard. The IPA bankruptcy bomb has triggered a wave of personal insolvencies, says Mr Swan, and many others have resorted to second or third mortgages to keep their practices afloat as they reorganize their patient base.

The CMA swiftly jumped into the action, filing suit against the IPAs to help the physicians recoup their money, but Mr Swan is quick to add, "There's really no orderly way for physicians to get paid."

Why Problems Exist
IPAs began with a simple mission: By joining an association, physicians could remain independent and have a third party negotiate managed care contracts that would steer patients and revenue their way. Going through an IPA also allowed physicians to avoid antitrust laws. For many physicians the IPA looked like a better bet than the physician practice management groups that were buying up practices throughout the country in the early- and mid-1990s. But the IPAs didn't always keep their simple goals in focus. Some ventured into new territory-such as operating their own hospitals. Others got in over their heads trying to manage risk contracts and ended owing more for medical service than their managed care contracts covered. Now it's becoming clear that many IPAs are experiencing financial woes that not only threaten their existence, but also the independent physicians they represent. And many industry experts say that even as the damage mounts around the country and starts hitting close to home, few physicians have shown much concern over how their IPAs are functioning.

Ms Monaco says physicians typically fall into one of two categories: those in the majority who don't have much interest in business and strictly like to practice medicine, and those in the minority who have a keen interest in business-often the physicians who end up on the board of an IPA.

The rapid growth of IPAs brought in a highly unstable group of newcomers to the medical field, says Rich Johnson, head of Texas Medical Association's Division of Medical Economics. "Often these organizations may not know the trouble they're in until the last minute," he says. "Frankly, that's part of the problem. They can experience difficulty very quickly."

Once an IPA files for bankruptcy, a physician can't do much more than notify his lawyer and stand in line with the rest of the creditors.

"By the time your IPA has gotten to the point of filing for bankruptcy protection, cents on the dollar is the best you can hope for," Ms Monaco says.

IPA Protection
Although the threat of bankruptcy hovers over some IPAs, there are many good IPA contracts, and you shouldn't hesitate sticking with them. Whether you are in an IPA agreement or are considering signing one, healthcare professionals all agree: The physician who acts as his own attorney has a fool for a client.

"Get competent advisers to analyze agreements or any contracts," says Rich Johnson, head of Texas Medical Association's Division of Medical Economics. "In our experience, physicians don't always take as much care as they should."

If your IPA is up and running and you suspect bankruptcy, don't panic. Emotional decisions can cost you financially and may create legal hassles.

"Your best protection is good information," says Sue Monaco, a healthcare attorney with Thompson & Knight. Make sure your IPA is delivering regular reports on its finances. You may opt to get monthly or quarterly statements, but if you can't figure it out, get your accountant or a managed care consultant to analyze the information for you.

In analyzing these reports, physicians need to distinguish between their risk-bearing and nonrisk-bearing contracts and determine the revenue that's coming from a risk contract, says Shellie Pruden, DCMS director of medical practice relations. "Determine what your comfort level is with risk revenue and separate that out so you can monitor it."

Ms Pruden recommends keeping a balanced payer mix. "Spread managed care contracts among single and multispecialty IPAs and individual contracts," she says. If you choose to contract independently, carefully review the contract terms and have a legal review done. "Don't buckle under artificial deadlines given by managed care organizations."

Check your IPA's insurance coverage. "Good officers" coverage can help protect member physicians if the IPA's board of directors did not engage in reasonable business practices-a possible deep pocket for physicians trying to retrieve their money. Stop-loss insurance coverage also will allow an IPA to off-load excessive losses onto the stronger backs of an insurance company. But don't expect extra insurance and regular statements to act as a guarantee against an unexpected bankruptcy.

If you are notified of bankruptcy proceedings, hire an attorney with managed care and bankruptcy experience, and keep in close communication with the creditors committee, which makes decisions about distribution of funds.

In a bankrupt IPA, Ms Monaco says, a physician has a good chance of going around the financially troubled association and signing a new deal directly with the managed care company that had been steering patients his way. The physician still may suffer a severe cash crunch during the initial shock, but negotiate carefully-it's important not to panic.

© 2000, Dallas Medical Journal. The above is for private use by viewer only and is not to be reprinted without permission by the Dallas County Medical Society.

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