PLATE: Dr. William McCabe looks over the chart work Monday at Allied Family Care in Mesa.
Emily Piranio For the Tribune
cure for failing practices
Ed Gately, Tribune
William McCabe, a family practice physician, remembers when he had his own private practice in Mesa with nine physicians on staff. Now, he works for Banner Health, which took over his
practice after skyrocketing expenses and limited income forced him out of business.
Family Care, which used to be his practice, is located adjacent to Banner
Mesa Medical Center,
and now has just two physicians and a nurse practitioner on staff.
“Banner (then Lutheran Healthcare System)
asked me to expand my practice originally because they needed some more support . . . to keep feeding the hospital,”
McCabe said. “They said they would underwrite a loan for me and they would support the practice until it got going.
I was trying to pay the overhead myself, buying insurance for people and trying to have a 401(k) for them and such, and I
just went flat broke.”
McCabe knows of at least six other primary care offices in the area that have closed
recently because the physicians couldn’t earn enough to cover their practice expenses.
“Things are pretty
desperate for primary care,” he said. “The nationwide average income for family physicians is around $120,000,
and none of the doctors in my practice were making $100,000. We make less, probably $20,000 to $25,000 a year less than the
doctors in other states.”
According to a recent national study by the Center for Studying Health System Change,
physicians’ net income from practicing medicine dropped about 7 percent between 1995 and 2003.
Among the different
types of physicians, primary care physicians saw the biggest drop —10.2 percent — during that period.
income fell by 8.2 percent, while specialists’ income remained unchanged.
Dr. Collin Udall, a primary care physician
at Paragon Medical Associates in Mesa, said about 75 percent
of his practice’s revenue goes toward expenses, up from about 60 percent when he first went into practice.
practice includes Udall, a second physician, a nurse practitioner and other staff members.
“Right now, the problem
is there’s money out there and it’s being paid all different places, and how much we make pretty much goes down
every year because there’s so much else that has to be paid,” he said.
The cost of business for doctors
is “killing doctors,” said Chic Older, executive vice president of the Arizona Medical Association.
got the cost of health care killing business and the cost of business killing health care,” he said.
Physicians are paying more for medical liability insurance than ever before to help cover higher dollar
claims, said John Carland, chairman and CEO of Mutual Insurance Co. of Arizona (MICA), which insures most physicians in Arizona and is owned by its policyholders.
MICA increased its
medical liability insurance rates 5 percent in 2002, 12.5 percent in 2003, 16 percent in 2004, 6 percent in 2005, and 5 percent
Other carriers have been forced to implement even higher rate increases, Carland said.
severity is the first, second and last reason for increasing premiums,” he said. “Juries are coming back with
bigger judgments. When a jury comes in with a judgment, everybody involved in this business, including the plaintiff attorneys,
read what that value was and then that’s the value that they look for when they have a similar case and they’re
looking for a settlement. So it drives up settlements as well as judgments.”
Judgments that include millions
in “non-economic” damages are driving up medical liability insurance rates, Carland said.
$500,000 case, pain and suffering can be $5 million,” he said. “Obviously that’s something very difficult
for an insurance company to predict and therefore charge for. (Unlike California), Arizona has no cap on pain and suffering. We have no damage caps of
any kind because we’re prohibited from that in our constitution.”
Medical liability insurance rates are
higher for physicians who have been in practice the longest, McCabe said.
“I’ve been in practice 44 years
and I’ve never had a successful malpractice suit,” he said. “I did have a couple filed in the 1970s, but
I’ve never had a successful malpractice suit, and yet my malpractice keeps going up because I’m at risk for all
of the people I’ve seen over the years.”
The percentage of a physician’s income that goes toward
insurance is roughly the same regardless of specialty, Older said. Family practitioners may pay less than neurosurgeons, but
they also make less money, he said.
Udall said his medical liability insurance is $18,000 this year, compared to $16,000
That was just one cost increase he’s had to deal with this year.
“Our benefit expenses
for our employees . . . their health benefits went up about $1,000 a month (each) this year, and salaries, of course, keep
going up,” he said.
MEDICARE AND MANAGED CARE
Physicians strive to maximize the number of patients they
see, and correctly code (transform verbal descriptions of diseases, injuries, and procedures into numeric or alphanumeric
designation) so they are paid correctly, while keeping their expenses as low as possible, Udall said.
year it gets a little bit harder to do that,” he said.
Medicare reimbursement steadily has been declining, along
with reimbursement from managed-care organizations, McCabe said.
Earlier this year, Congress voted to halt a 4.4 percent
cut in Medicare physician pay.
“We can charge anything we want, but Medicare will only reimburse a certain amount
and the managedcare companies pay us based on a percentage of Medicare, less than 100 percent of Medicare,” he said.
“We’re down 20 percent. If I could get $100 for a service in 1997, I’m now getting $80 for that same service.
It’s a severe reduction on the income side, while the outgoing side has gone up and up, and up.”
to the Centers for Medicare & Medicaid Services, federal statute requires an annual proposal to cut Medicare reimbursement
Arizona is a “mature”
managed-care market, meaning the vast majority of residents seeking health care services are part of a managed-care organization
like Humana, UnitedHealthcare and Health Net.
This means physicians must contract with managedcare organizations in
order to attract clients, and therefore are limited to reimbursement from managed care for their income because few if any
patients pay fees for services, said Andrea Smiley, the Arizona Medical Association’s director of communications and
“The domino effect for physicians is typically when Medicare sets whatever their pay is going
to, whether they’re going to keep it the same or lower it, and the managed care organizations typically follow suit
with some percentage of whatever Medicare is going to do,” she said.
In contract negotiations with physicians,
Humana tries to “get the best deals we can for our groups that we insure,” said Dick Brown, director of media
and public relations. Humana is the nation’s fifth-largest managed care provider, with more than 143,000 members in
“I guess it depends on which side
of the negotiating table you’re sitting on,” he said.
“There have been stories written about physicians
who don’t believe they’re getting enough of a reimbursement, and on the other side of the table where we sit with
our groups that we represent, the cost of health care is double-digit trending and we’re charged with trying to keep
that under control.”
Contact Ed Gately by email, or phone (480) 898-6814
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