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Cattaneo & Stroud, Inc.
1601 Old Bayshore Highway, Suite 107 Burlingame, California 94010-1506 650/692-8884 Fax 650/692-5923 Website: www.cattaneostroud.com	Spring 2001

Physicians: Will They Be There?

 

Widespread concern about shortages in human capital needed to provide medical care to California communities has surfaced in the past year.  The public battle over hospital-nurse staffing ratios has gotten much of the attention.  However, we at Cattaneo & Stroud, Inc. (C&S) have a number of clients who are also greatly concerned about whether their communities will have an adequate number of physicians to meet their community’s need. Their concern is exacerbated by the growing uncertainty that, having to take on debt to meet SB 1953 seismic requirements, they will have the necessary physician base in their community to serve patients and generate the future revenues needed to fund these major projects.
 

MEASURING PHYSICIAN SUPPLY

 

Why Measure Physician Supply?  In addition to providing the necessary analysis to help evaluate whether debt service for major capital projects can be met, measuring physician supply is critical for a number of other reasons.  These include:  determining whether the hospital has an adequate number of physicians to meet payer and market place needs, ascertaining if there are enough physicians on staff to ensure continuation of hospital expertise/licensure in particular service lines such as cardiovascular or orthopedic surgery, and knowing if an adequate number of primary care physicians are available to meet primary health needs of community members.  Assessment of physician supply is also a necessary step to evaluate and justify hospital support of joint hospital-physician efforts in physician recruitment programs.

 

Standard Measures of Physician Supply:  C&S has developed a model to assess the adequacy of physician supply.  We utilize a number of published studies as well data derived from medical groups successful in care of defined populations in order to establish standards for required number of physicians by specialty and/or by cluster (e.g. primary care physicians).

 

The C&S model includes modifications for unique characteristics of the community and physician practices.  The analyses are generally developed to reflect both current and projected needs (e.g. five-years later).  Factors such as penetration of managed care and age of practicing physicians are considered.  Interviews with physicians to determine practice styles and distribution of clinical activities related to the availability of specialty and hospital services in the community are included in the assessment.  Each community has unique characteristics that must be evaluated.  Some factors we have encountered in previous analyses include the need to adjust for a disproportionate number of physicians in part-time practice, the prevalence of hospitalists which impacts the need for office-based primary care, adjustments for physicians who have active practices in multiple communities, and unusual demographic characteristics in the community such as a substantially larger portion of older or younger residents than average.

 

How to Measure Physician Supply in Your Community?  C&S uses data from a national company specializing in medical personnel databases as a starting point. The data elements include physician specialty, age, office location, board certification and numerous other elements.  Information from other appropriate sources is then added to these core data.

 

We analyze and categorize the data  to adjust for physicians practicing in multiple locations and/or listed under several specialties.  Inappropriate listings are purged and omitted practitioners are added.  When complete, the organization will have a unique and accurate database that is vital for the kinds of analyses and projections it needs.  Projections from the database are then compared to the supply targets determined for the specific community to assess physician need.

 

ISSUES FACING PHYSICIANS

 

Lack of Younger Physicians:  In a number of the analyses C&S has conducted, a shortage of younger physicians in the community has been identified as a critical issue.  For example, in one Northern California community, there was a smaller proportion of physicians aged 39 and under, especially in the medical and surgical specialties.

 

MDs by Age Cluster and Kaiser Status

  

Physician Compensation:  The high managed care penetration in California, the proactive stance of employer alliances such as Pacific Business Group on Health and CalPERS, and the competitive environment which encourages physicians to sign payer contracts have negatively impacted physician compensation in California.  In the past few years, a number of large (and small) physician groups and IPAs have declared bankruptcy or simply stopped doing business (see C&S Web Site: “Med Group Reports” for detail).  The Thomas Bodenheimer article in the 4-6-00 New England Journal of Medicine on “California’s Beleaguered Physician Groups” notes that capitation rates showed decreases of 20% to 25% from the early to late 1990s.  Reductions in payments and enrollment in Medicare HMOs have had considerable impact on physician revenues as many groups had relied on strong HMO senior programs to offset thin margins in their commercial business.  Physicians with large patient enrollment in capitated contracts have had the added burden of extraordinary cost increases in pharmaceuticals and specialty care.

 

Overall, compensation in the Western US does not compare favorably to other regions.  Data published by MGMA provide information on median incomes for physicians by selected regions.  Some examples include:

 

	Western	Eastern	Midwest	South
FP	135,126	137,714	140,435	155,103
IM	142,386	148,417	143,490	154,926
Peds	135,946	144,785	144,651	145,836
G.Surg	214,043	214,254	250,037	281,799
G.Ortho	272,542	312,215	336,642	365,625
Cardio	315,939	314,000	353,491	424,314
Urology	221,686	280,464	297,265	278,018

(Source:  MGMA Physician and Production Survey 2000)

 
While these data do not give specific information for California, practitioners in California account for almost 50% of survey participants in the Western region.  The June 2000 Kaiser Family Foundation publication “Health Care Trends and Indicators” reports 1997 mean net income of $172,400 for California physicians compared to $199,600 for the US mean.

 

Of course, since the MGMA data are medians, the financial success enjoyed by any individual physician could vary widely.  However, physicians deciding where to begin their careers might note that the median compensation for a Family Practitioner would result in almost $20,000 per year less in the Western region than in the South.  A general surgeon would make almost $68,000 less and an invasive-interventional cardiologist would earn $108,000 less if performing at the median level in the Western region as compared to the South.

 

Costs to manage a practice with the high managed care penetration in California are harder to control, even for physicians not involved in capitation. The burdens of obtaining plan approvals and authorizations increase personnel expense.  Billing and collections can be more complex and higher write-offs may result as physician’s office staff contend with a large number of different health plan arrangements. 

 

Housing Costs:  The difficulty facing California communities in meeting physician needs is further exacerbated by the disproportionate share of income required for housing.  Physicians not otherwise tied to California may search nationally for the most ideal environment to begin a medical practice.  Particularly in urban environments, California housing costs outpace most areas of the country.  For example, across the US, the percentage of households that can afford to buy a home is 57%.  In California, it drops to 34%.  Examples of affordability in selected California urban areas are shown below.

 

Location	% Population That Can Afford to Buy	Affordability Compared to National Avg.
US	57%
California	34%	-23%
Sacramento	53%	-4%
Los Angeles	38%	-19%
Orange County	28%	-29%
San Diego	25%	-32%
S.F. Bay Area	18%	-39%

(Source: California Association of Realtors)

 

While current economic downtrends have begun to impact housing prices, California remains among the most expensive areas in the country. California urban areas account for five of the six least affordable cities in the country, and seven of the twelve least affordable urban areas in the country.

 

Other Work-Life Issues:  When physicians look for places to establish their practices and raise their families, concerns about weaknesses in classroom education and low funding of public schools (K-12) in California are raised.  According to Editorial Projects in Education Inc., publisher of “Education Week”, California ranks 40^th in the nation in education spending per student for grades K-12.  California’s $5,235 per student per year is well below the national average of $6,408.  While some challenge the significance of this discrepancy, it is clearly well below spending of New England and Midwest states which rank in the top 20 with spending ranges of $6,500 to $10,000 per student.

 

Traffic congestion is another top issue sited in quality of life surveys.  Nationally, three of the top five most congested regions (Los Angeles, San Francisco-Oakland and San Diego) in the US are in California.  Three others (San Jose, San Bernardino and Sacramento) tie for 15^th.

 

One other factor negatively impacting new physicians beginning practice in California is the relative low proportion of physicians trained in California compared to the size of the state.  California accounts for just over 12% of the total US population, but California medical schools train only 6.3% of  US educated physicians.

 

WHERE DO WE GO FROM HERE?

There are no easy solutions to the challenges facing communities as they attempt to replace retiring physicians and/or add physicians to meet community growth. C&S has worked with clients in a number of ways to begin to address this critical issue.

 

Generally, first step is a complete assessment of the current supply and projected needs.  Next steps will vary depending the projected need and which specialties are particularly impacted, and will be driven by the priorities of the community and the long-term strategy of the hospital and/or medical groups.

 

In some situations, a task force of key constituents can develop solutions uniquely applicable to the community.  Opportunities for collaboration with other medical groups and or hospitals may be explored.  The organization might also choose to study how the “bio-system” of care providers work together.  This can increase understanding of any gaps that may back-up the care delivery system and identify solutions to ensure more effective availability of physician care.

 

Legislative options may also be explored.  The current interest on the part of federal and state lawmakers to the nursing manpower needs have heightened awareness of the critical shortages which can impact the well-being of community members of elected officials.

 

C&S can work with your organization to begin finding solutions to the challenges of meeting physician needs.

 

If you desire additional information, please contact C&S via: E-mail:"info@ cattaneostroud.com" Fax (650) 692-5923 Phone (650) 692-8884 Guestbook

Please send questions or comments to tim@nettop.com