Independent Physician Associations and Their Impact on Managed Care Plans
Independent Physician Associations (IPAs) play a significant role in California’s healthcare landscape, especially for individuals covered under managed care plans. While they aim to streamline healthcare delivery and reduce costs, the structure and financial incentives of IPAs often create conflicts that can lead to unreasonable denials of necessary care. Here’s what you need to know about IPAs, how they function, and how their financial arrangements may impact patient care. If you think your claim for healthcare services has been unfairly denied, contact Gianelli & Morris to discuss the matter with an experienced and successful California insurance bad faith lawyer.
What Are Independent Physician Associations (IPAs)?
An Independent Physician Association (IPA) is a network of independent doctors who come together to provide medical services to patients enrolled in managed care plans, such as Health Maintenance Organizations (HMOs). These doctors remain in private practice but contract with the IPA, which acts as an intermediary between the doctors and insurance companies.
The IPA handles administrative responsibilities, such as negotiating payment rates with insurers, managing billing, and coordinating patient referrals. In exchange, the IPA receives payments from insurance companies to cover the cost of patient care. These payments are typically distributed among member physicians based on the services they provide and other financial arrangements within the IPA.
How the Ways IPAs Are Paid Can Impact Your Claim for Services
Unlike traditional fee-for-service arrangements, where doctors are paid for each service provided, IPAs often operate under capitation and risk-sharing agreements. These payment structures create financial incentives that can impact the quality and quantity of care patients receive.
1. Capitation Payments
Under capitation agreements, an IPA receives a fixed monthly payment from the insurance company for each patient enrolled in the managed care plan, regardless of whether the patient seeks care. This payment is intended to cover the cost of all medical services the patient might need during the month.
While capitation encourages cost control, it also creates a troubling incentive for IPAs: they can maximize profits by providing less care. If a patient requires extensive medical treatment, the cost of care may exceed the capitation payment the IPA receives, creating financial pressure to deny or limit services. In contrast, if the patient receives no care at all, the IPA receives free money in the form of the capitation payment for that enrollee.
The financial structure of IPAs also incentivizes doctors to take on more patients than they can reasonably manage. By enrolling more individuals in the managed care plan, the IPA receives higher capitation payments. However, this often results in doctors having less time to spend with each patient, potentially leading to rushed appointments and neglect of complex medical needs.
2. Risk-Sharing Pools
Risk-sharing pools are another mechanism that can influence how IPAs manage patient care. These pools are essentially financial reserves funded by both the IPA and the insurance company. At the end of a specified period, any unused funds in the pool are distributed as profits.
To increase these profits, IPAs may limit access to expensive medical services, such as specialist consultations, diagnostic tests, or certain treatments. For example, an IPA may delay or deny authorization for a costly but necessary procedure to preserve the funds in the risk-sharing pool.
The Patient Impact: Denial of Necessary Care
For policyholders enrolled in managed care plans, the financial incentives of IPAs can lead to devastating consequences. Denial of care or delays in treatment can exacerbate medical conditions, resulting in more serious health issues down the line. Common bad faith insurance practices include:
- Refusing to approve specialist referrals.
- Limiting access to advanced diagnostic tests.
- Denying authorization for expensive procedures.
In some cases, patients may not even realize their care has been denied by the IPA rather than their insurance company. These denials often appear as administrative decisions, making it difficult for patients to challenge them without professional assistance.
Fighting Back Against Unreasonable Care Denials
If you have been denied medical care by an IPA or your health insurance provider, it is essential to know your rights. Under California law, insurance companies and their contracted entities, such as IPAs, are required to act in good faith and provide the care promised under the terms of the health plan. Denying care without a valid reason may constitute bad faith, and you may be entitled to compensation not just for the cost of denied benefits but for any additional harm caused by an unreasonable delay or denial.
At Gianelli & Morris, we help policyholders in California hold insurance companies and IPAs accountable for bad faith denials of care. If your health insurance claim has been wrongfully denied or delayed, contact us today at 213-489-1600 to discuss your case.
