Wednesday, June 27, 2001

Alliance looks to doctors for savings

Plan is to stem losses in primary-care group

By Tim Bonfield
The Cincinnati Enquirer

        In its second budget-cutting move of the week, the Health Alliance of Greater Cincinnati will meet with doctors today to discuss the finances of Alliance Primary Care, a large physician group that has lost money since it started in 1997.

        Alliance Primary Care (APC) is the Tristate's largest primary-care physician group. It has 141 doctors in about three dozen offices who record 700,000 patient visits annually. However, membership has declined about 20 percent since this time last year, when the APC group included 173 doctors.

        Health Alliance officials said Tuesday they will propose a new compensation plan aimed at reducing losses that have run between $13 million and $19 million a year for the past three years.

        The APC group also plans to consolidate six offices, in Mason, Green Township, Mariemont and Oakley, into three.

        Alliance officials say they have no plans to dissolve the group.

        The potential community impact of the new pay plan remains unclear. Some doctors are likely to leave the APC group, but if most continue to practice it will amount to little more than an inconvenience for patients.

        “Obviously, we want it to be more financially viable. But Alliance Primary Care is still very much a part of the short-term and long-term strategy for the Health Alliance,” said spokeswoman Gail Myers.

        This is the second big cost-cutting move announced this week by the Health Alliance, where a new chief executive, Ken Hanover, started work June 1 and its fiscal 2002 starts Sunday.

        On Monday, the Health Alliance announced it would cut 450 of its 13,000 jobs to save about $20 million a year. About 200 of the jobs were vacant.

        On Wednesday, the Health Alliance expects to begin carrying out the next big step in a two-year turnaround plan for the APC group.

        Managers said it was too soon to discuss details of the proposed pay changes. The plans are not final, and would not take effect until Jan. 1, said Dr. Robert Pritchard, senior executive officer for APC.

        In general, the Health Alliance plans to make doctors more responsible for their office overhead costs, Dr. Pritchard said. Such a change would be a radical shift.

        The Health Alliance formed the APC group by purchasing many smaller doctor partnerships. In return for agreeing to work for a salary, the Health Alliance took over the costs of business details such as billing, information systems and employee benefits.

        The Health Alliance also agreed to pay APC doctors the same rate for their work regardless of the differing reimbursement rates collected from Medicaid, Medicare or a patient's private insurance.

        Now, that structure will change. The group is shifting to a more traditional pay structure that requires more expenses to come out of revenue before doctors get paid.

        The change will make more doctors more conscious of staff size, supply costs and other factors, Dr. Pritchard predicted.

        To some, the APC group's previous pay model was doomed to fail.

        “A lot of people considered these turn-key operations very attractive. But the concept hasn't made money anywhere,” said Dr. Andrew Loewy, a former APC member who recently opened a solo practice in Kenwood. ""People thought they could apply a corporate-type management model onto the practice of medicine. It has proven to be a bad idea.”

        Losses at APC have accounted for some of the largest puddles of red ink at the Health Alliance, which lost a combined $88 million in fiscal 1998 and 1999 but has climbed back to predict a $2 million gain in fiscal 2001.

        Last year, the APC group closed nine of its 44 offices and more than 30 doctors left the group. This year, Dr. Pritchard said, another wave of doctors probably will leave the APC group, but he predicted that few will actually leave the community.


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