More layoffs in Southern California; Kaiser postpones network expansion

Orange County, CA—Southern California physician groups are continuing to close more offices, lay off staff, and scale back operations in the face of declining reimbursement from managed care payers and rising medical costs.

Orange County, CA-based Bristol Park Medical Group, which employs 110 physicians and is one of the largest groups in that county, announced last month that it was closing four of its offices and laying off eight physicians and six nurses and physician assistants.

In addition, Kasier-Permanente, Inc., the nation’s largest HMO, is scrapping plans to expand its network of offices in the area, according to a November 6 report in the Los Angeles Times.1

Industry experts say payments from health plans have failed to keep pace with rising costs of medical care, particularly given the new spate of legislatively mandated health services like minimum inpatient stays for new mothers, and mandated coverage of new drugs.

According to industry estimates, physicians in southern California face more financial pressures due to the larger percentage of the patient population covered by managed health plans. Managed care contracts also typically drive up a group’s administrative costs.

A recent survey of 1194 group practices by the Medical Group Management Association that listed the percentage of practice costs compared to total annual revenue found that an estimated 61.08% of revenue was absorbed by costs in practices in the western United States, compared to estimates of 58.99% in the eastern United States, 55.75% in the Midwest, and 55.49% in the South.

References

1. Barbara Marsh. Physician Groups Cutting Staff, Costs to Stay in Business. Los Angeles Times November 6, 1998.