San Diego Business Journal

Doctors' Groups Say They Feel Pressured To Join Hospital Network

Scripps Health officials deny earlier press reports saying the hospital system is terminating all its contracts with physician groups.

Dr. Stan Pappelbaum, president and chief executive of Scripps Health, said only two "full-risk" physician groups , the Mercy Physicians Medical Group and San Diego Physicians Medical Group , will see their contracts terminated starting Jan. 1.

A Scripps spokeswoman, however, admitted that those were the only two full-risk contracts the nonprofit hospital system has struck with local physician groups.

Under a capitated "full-risk arrangement," insurance companies pay hospitals and physician groups a set fee in return for sharing the financial risk of delivering health care.

For the doctors' groups, the termination of such contracts mean they will have to pay higher rates to admit patients to any of Scripps' six hospitals in San Diego starting Jan. 1.

The six Scripps Health facilities are Scripps Green Hospital, Scripps Mercy Hospital, Scripps Memorial Hospitals in Chula Vista, East County, La Jolla and Encinitas.

For patients, it may mean they will be routed to another hospital that may be further away.

The issue has evoked great controversy in recent days within Scripps and in the medical community in general.

In a recent newspaper opinion piece, Dr. Robert Hertzka, president of the San Diego County Medical Society, voiced concerns that Scripps' action "will precipitate additional physician and medical group bankruptcy, which in turn will lead to more patients having to change their doctors "

Doctors' Group Jeopardized

Dr. Dennis Costello, president of the San Diego Physicians Medical Group, an independent physicians association (IPA) of 450 doctors serving 70,000 managed care patients, said Scripps' move to terminate its contract is jeopardizing the group's survival.

Costello explained that, with the contracts terminated, Scripps can now charge insurance firms higher rates for its hospital. The insurers, in turn, are likely to reimburse doctors less money to make up for the higher rates charged by the hospitals.

Costello said Scripps has been unsuccessfully trying to convince doctors in the group to join its own doctors network, Scripps Physicians, for three years. Many doctors see the contract termination as another attempt by Scripps to force doctors into joining its own physician network, he added.

"Doctors in private practice uniformly chose not to be a part of it (Scripps Physicians), because it's a hospital-run organization and their independence would be jeopardized," Costello said.

No Force Being Used

Pappelbaum vehemently denied Scripps canceled the contracts to "force" doctors into joining their network.

He said Scripps canceled the contracts so it can "consolidate its position on the marketplace."

Pappelbaum, however, admitted that he's been in discussions with the two medical groups whose contracts were terminated about joining Scripps Physicians for years. He said Scripps Health continues to hope the groups will join the Scripps network.

Costello, though, contends that is not an option for his group. Not joining the Scripps network, however, will take a financial toll on his group, he said.

That's because the health plans pay Scripps Health a higher rate for serving patients that belong to medical groups who aren't part of Scripps Physicians.

Health plans reimburse medical groups who want to admit their patients to Scripps hospitals at a lower rate.

Starting Jan. 1, the two medical groups will also have to pay a higher rate to admit their patients to any Scripps hospital, Pappelbaum agreed.

Scripps Health officials did not comment on the amount the rates will increase.

Costello said Scripps informed him on Dec. 16 that the rate increase would be substantial. He was unable to disclose exact figures.

Possible Rate Hikes

Hertzka speculates hospitalization rates may rise by 40 percent. However, Dr. Brent Eastman, president and CEO of Scripps Physicians, said the rate increase will be lower than that.

Costello said his group is in the process of determining whether it will continue sending its patients to the nearby Scripps hospitals or elsewhere.

"We have to evaluate the cost of doing business and patients have to understand that unless revenues increase we have to do what's cost effective," Costello said.

Other doctors in the community are also critical of Scripps' decision.

Dr. James Hay, a family practitioner at the North Coast Family Medical Group in Encinitas, part of the Primary Care Associates IPA, said he's relieved his group will not be affected by Scripps' action after all.

He said Scripps notified Primary Care Associates about two months ago that it will increase their rates starting Jan. 1.

He said it appears that Scripps administrators may have changed their minds amid the "strong reaction throughout the community."

Mercy Physicians Medical Group could not be reached for comments.