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The recent rash of failures among independent practice associations (IPAs) has some providers wondering if these organizations are the right vehicle for physicians to use when assuming risk and contracting with managed care plans and hospitals. Since 1996, more than 120 IPAs — 31 over the last year — have closed their doors in California, alone, reports the Oakland, CA-based IPA Association of America (IPAAA).
Albert Holloway, the IPAAA’s CEO, says the IPA model is still viable. "We are going through a trend of adjustment, and this adjustment is good for the industry," he says. "Once we come out of it, we will have much stronger IPAs, as a result."
According to experts, key elements an IPA needs to succeed include:
• Good cost and utilization data. "Successful IPAs don’t depend on managed care companies for data. They have their own data," observes Michael Wood, executive director of the Saint Louis (MO) Management Group, which manages 30 IPAs in five states.
Indeed, lack of data was a major reason behind the failure last April of Cascade Healthcare Alliance, a 200-physician IPA in Bellevue, WA, contends Claude DeShazo, MD, Cascade’s president and CEO. "We could never get accurate data from the health plans on our capitated contracts," says DeShazo. "It made it very difficult for us to analyze our activities."
• Adequate capitalization. A common mistake that IPAs make is starting without enough capital, says Wood, especially if it is not able to find a hospital partner.
• Unnecessary risks. Sound IPAs are selective about the contracts they accept. The Physicians Inc., an 1,800-doctor IPA in Louisville, KY, has 23 managed care contracts, but has avoided signing a fully capitated agreement because it believes that would be too financially risky for the organization.
• Good information and sound management. "You’d be amazed at what you can do once you have a good reporting, adequate utilization, and financial information and sound physician profiling in place," says Michael Eberhard, CEO of Medical Pathways, a Cerritos, CA, firm that specializes in turning around and managing faltering IPAs.
• Empowered doctors. " Physicians must feel like they have a stake in the situation to get them to support the changes that need to be made and to get them to work," Eberhard stresses. One tool to achieve this goal is to capitate the primary care physicians and at least some specialists.
• Better contracts. Marginal IPAs are often paid 10% to 20% less than their stronger counterparts, notes Eberhard.
• Focus on quality care and accountability. Successful IPAs always make quality care their first priority, says Holloway. University Affiliates, a non-profit 3,000-physician IPA in Alhambra, CA, for instance, operates more like a multispecialty group practice than an IPA, says Sam Romeo, MD, its president and CEO. "This, in turn, allows the physicians in the IPA to collaborate closely with one another on patient care," he notes. "While we are an IPA in a legal sense, we are much more like a group practice, which is the only way you can be accountable."