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Doctors' Authority, Pay Dwindle Under HMOs : Health: Many feel pressured to cut corners and costs. Specialists are hard hit as access to them is curtailed.

THE HEALTH CARE REVOLUTION. Remaking Medicine in California. One in a series


San Diego cardiologist William Ceretto seemed to have it all: money, prestige and a thriving medical practice in a beautiful city.

Then FHP Inc. pulled the plug.

Ceretto's practice has been hemorrhaging since the giant health insurer pulled its contract with him in February. FHP switched his patients to another cardiology group willing to work more cheaply. Gone were 3,000 patients--and half of Ceretto's income.

"The doctor won't be in until 2 p.m.," said a receptionist in Ceretto's office one recent morning. "He has no patients until then."

A few years ago, Ceretto was taking home $400,000 a year. Today he's going broke. He facesforeclosure on the two-story, four-bedroom home that he had remodeled at a cost of more than $300,000. His $70,000 Mercedes--that doctors' symbol of success--is for sale. He has been talking to bankruptcy lawyers.

"This is destroying me," he said. "I feel like I wasted my time in school and I'm not of any value anymore. You have trouble dealing with the respectful way that patients still think of you, and the contrast of what you're being told by the health plans. Inside, you feel worthless."

From medical offices in musty Mid-Wilshire high-rises to the gleaming towers of prestigious teaching hospitals, many California physicians share these feelings of panic and powerlessness. And with good reason.

Doctors who once topped the medical pecking order have been supplanted by increasingly powerful HMOs which, along with a handful of sophisticated employers, now wield tremendous influence over health care. Doctors who once thought of patients as their own now find it is the HMOs that control these "covered lives," as patients are known in the jargon of managed care.

"We see bankruptcies all the time and we see doctors closing their offices, walking away and getting nothing for their practices," said Arthur Shorr, a Woodland Hills health care consultant. "Today, in Southern California, there is not a doctor who doesn't appreciate that managed care is king."

Physician organizations are frantically searching for ways to recapture some control. The powerful California Medical Assn. has been pressing lawmakers in Sacramento to pass legislation that would curtail the powers of HMOs. The CMA has also mounted a fledgling effort to create a health plan that would be run by doctors.

For now, though, it is the HMOs that are winning this power struggle--hands down.

"Physicians feel that there is an unlevel playing field, that they have both hands tied behind their backs in trying to contend with large corporate entities," said Lonnie R. Bristow, a San Pablo, Calif., internist who is president of the American Medical Assn.

Nowhere in the country are HMOs as significant a force as in California, home to some of the nation's biggest health plans: FHP, Foundation Health, Health Net, Kaiser and Pacificare. The growth of HMOs over the last decade--to the point where 12 million Californians are members--has profoundly affected the state's 100,000 physicians.

* Demand for physician specialists is shrinking dramatically as HMOs tightly restrict the use of these highly trained doctors. Income in some of the highest-paid specialties--cardiology and orthopedics, for example--has plummeted 30% to 40% in just the past year. Many doctors are working longer hours or taking temporary jobs in other states to supplement their incomes.

* At the same time, family and primary care doctors--generally the lowest-paid in their profession--find their stock rising with better salaries and brighter job prospects.

* In an experience once unimaginable, doctors are being fired or laid off in cost-cutting moves by HMOs and affiliated medical groups.

* Solo practice--which for generations has been a dream of newly minted doctors--is facing extinction in California. Today, financial pressures are forcing scores of independent-minded doctors to sell their practices and join larger medical groups.

An FHP official says that Ceretto was offered a chance to continue seeing health plan members if he joined a large cardiology group, but that he turned it down. Ceretto says he never got a formal offer.

In any event, many doctors who are selling their practices are in for a shock: the value of the business they built may be far less than they thought.

* Seeking to escape managed care's impact, doctors are leaving California for destinations such as Arkansas, Idaho, Montana or Oklahoma, where HMO enrollment is still scant. More than 2,600 doctors gave up their California licenses last year, according to the California Medical Board.

* Scores of doctors are retiring early or leaving medicine to start new careers as entrepreneurs, lawyers and medical administrators.


California has long been a magnet for some of medicine's best and brightest, lured here by good weather, top-notch medical schools and hospitals, and a plenitude of patients.

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