Reassessing the Plight of Physician Organizations in California: The Uncertain Future for IPAs

Abstract

With numerous medical groups and individual practice associations (IPAs) in California now reporting operating losses--and many approaching financial insolvency--the question arises why physician organizations are in such a tenuous situation. One line of thinking is that the problem is attributable to the market dominance of the major health plans and their ability to impose actuarially unsound low capitation rates on professional providers. This article describes four other reasons for the current plight of physician organizations: (1) a physician-centric approach to IPA governance, (2) lack of qualified staff within key operating units, (3) management reporting that is insufficient to support utilization analysis and health plan negotiations, and (4) a highly charged political process for determining physician reimbursement. IPA survival will ultimately depend upon whether IPAs are perceived by their physician members and leaders as true business operations or just as another income source.