L.A. Physicians' Plight: Longer Hours, Less Pay.

THE medical community has a favorite joke that's being passed around on the Internet: A pipe bursts in a doctor's house. He calls a plumber. The plumber arrives, unpacks his tools, does mysterious plumber-type things for awhile, and hands the doctor a bill for $600.

The doctor exclaims, "This is ridiculous! I don't even make that much!"

The plumber answers: "When I was a doctor, neither did I."

Ba-da bing! Funny, right? But for many physicians in Los Angeles, the joke hits too close to home.

With the penetration of managed care at an all-time high in Southern California, doctors find that their hours have increased, their wages have remained stagnant, and that practicing the "healing arts" is becoming more and more like working on an assembly line.

"It used to be that unless you were an idiot, you could make a very good living as a doctor," says Dr. Eldridge Pearsall, an OB/GYN. "It's not like that anymore. I know people who are really struggling, having to take part-time jobs at clinics to make ends meet. It's a good, solid middle-class job. People who are starting out now better realize that they're not going to get rich. They're not going to have vacation homes and yachts, and they better be doing this job because they like it."

Pearsall, 54, is medical director of the New Arrivals Prenatal Center at Northridge Hospital. He has been in practice for almost 20 years, first as a solo practitioner and then with the hospital since 1996.

In that time, Pearsall has witnessed radical changes in the way health care is delivered in Southern California. Twenty years ago, it was viable for doctors to set up an independent shop and attract their own patients. Now, in the age of managed care -- with its system of capitated service payments and the resulting low reimbursement rates for physicians -- that scenario is increasingly rare and doctors are trying to adjust.

Day in the life

A recent Tuesday is a typical day for Pearsall. He is called in to the hospital at 4 a.m. to assist with a Caesarian-section birth. After that, he goes home, takes his kids to school, and then heads over to the Planned Parenthood facility in Canoga Park, where he volunteers twice a month with patients who e having complicated gynecological problems.

At 10 a.m., Pearsall arrives at the prenatal center, where he has a slew of patients. Today, he sees 12 women as part of his normal slate of office visits. For him, it's kind of slow day; some days he sees as many as 25 women.

All this doesn't include the number of women who are in labor at the adjacent hospital that Pearsall runs over to check on. On this day, there are two. In addition, there are women in post-delivery recover rooms he tries to keep an eye on.

Pearsall estimates that he works about 60 hours a week -- at times very erratic, uneven hours because of the nature of his specialty. Does he feel overwhelmed?

"All you can do is accept it," Pearsall says. "It's life. You end up increasing your volume of patients in order to make a living."

It's a common complaint made by physicians -- as their workload goes up, their pay is stagnating or decreasing.

The median salary for most categories of physician specialists rose less than 3 percent in 1998, according to the trade publication Modern Healthcare, which aggregated the results of nine salary surveys from organizations like the American Medical Association, Ernst & Young LLP, and the Medical Group Management Association. For pediatricians, as an example, respondents' annual salaries ranged from $105,375 to $142,995.

That's a far cry from the image of millionaire doctors who take Tuesdays off or tee time and Thursdays off for tennis. Anecdotal evidence abounds that doctors are getting paid less by managed care groups for performing the same services that they were delivering before -- a trend that is particularly noticeable in Southern California.

A study commissioned by the California Medical Association and conducted by PriceWaterhouseCoopers LLP finds that 46.6 percent California's population is enrolled in an HMO. This represents 59 percent of the state's entire insured population. More than 85 percent of all Californians who receive health coverage through their employers belong to an HMO.

By comparison, about 40 percent of the population in Pennsylvania is enrolled in an HMO, and HMO market penetration reaches 38 percent in New York. The national average is about 33 percent.

The more patients enrolled in HMOs, the greater the pressure on doctors to contract with the organizations, and with an increasing number of different HMOs. The result is a complicated amount of paperwork that physicians must process -- to correlate which services are covered by which HMOs, at which times, and what authorizations are required.

Avalanche of paperwork

Pearsall estimates that 60 percent of his patients receive health insurance through Medi-Cal, and the remaining 40 percent via an HMO. The occasional patient still pays cash, but they are few and far between. The result is a logistical nightmare, with members of Pearsall's staff frequently on the phone to various companies trying to straighten out the coverage issues of their patients.

"That's all I do, all day long, is sign paperwork," Pearsall says, with a resigned laugh. "That's a big change from 10 years ago."

Once all the paperwork is complete, the reimbursement rate becomes the problem. HMOs contract with physicians to provide care to patients for a flat rate, called a capitation fee. If the cost of care exceeds the capitated rate, which frequently happens, the doctors must somehow make up the difference.

This puts an undue amount of pressure on solo practitioners. When Pearsall was in private practice, he figured out once how much money he took in from a typical HMO, based on the amount of reimbursement he received from delivering a baby. The results were not encouraging.

From a strictly medical standpoint, it costs about $500 to deliver a baby, Pearsall says. Add to that the costs of running an office -- everything from malpractice insurance, to rent, to office supplies to employee salaries -- and you can tack on another $800 per baby.

So for the total $1,300 baby-delivery cost, Pearsall would receive a reimbursement as low as $900, depending on the HMO. Other HMOs would reimburse as much as $1,500, pushing him toward breaking even or making a small profit.

"The cost of overhead was too much," he says, explaining why he left private practice to join a hospital full-time. "The payment goes down, but the costs don't go down."

Walter Zelman, president of the California Association of Health Plans, concedes that physicians are being squeezed, but adds that they're not the only ones.

"There is unquestionably a great deal of financial stress in the health care industry," Zelman says. "It's across the board. Profits of health plans have been marginal at best, and the salaries of physicians are still going up, but perhaps at a slower rate than physicians would like. It's a difficult time for all."

Litigation initiated

In September, the California Medical Association filed a lawsuit against eight HMOs practicing in the state, alleging that they are failing to adequately reimburse the physicians who treat patients in their plans.

"Thousands of honest, hard-working California physicians are now in truly desperate financial straits because the HMOs are simply not paying for care physicians have provided to the plans' own patients," says Dr. J.C. Pickett, president of the CMA. "This is an outrageous dereliction of responsibility on the part of the HMOs."

Zelman of the HMO trade group takes issue with that assessment.

The research that some physician groups have put out that suggests that capitation rates have fallen significantly in recent years is, from all the evidence that we know, inaccurate," Zelman says. "Our understanding is that in light of recent premium increases, more money is flowing to physicians. But this is not an issue of health plans vs. physicians. I think the issue is that people are demanding more of the health care system than it can deliver for the price that society is willing to pay."

HMOs are not the only ones drawing heat from doctors.

In December, the American Medical Association filed a lawsuit against the U.S. Department of Health and Human Services, charging that Secretary Donna Shalala had failed to use her authority to correct flaws in the system used by Medicare to pay physicians.

According to the AMA, the "sustainable growth rate," the formula used by the Health Care Financing Administration to figure out how much doctors should be paid for administrating patient care, was determined by using erroneous projections. The AMA estimates that the total loss to physicians nationwide during the two-year period of 1998-99 was $3 billion.

Banding together

So how are doctors fighting back?

At first blush, the notion of joining a physician practice management group, or PPM, appealed to doctors. Doctors would join management groups, which in turn would negotiate capitation rates with HMOs. By aggregating a large number of physicians, these PPMs hoped to gain clout in negotiating rates with HMOs.

But it didn't work out that way. Management companies didn't succeed in acquiring enough market share. And two of the state's largest PPMs, the Long Beach-based division of MedPartners and San Diego-based FPA Inc., folded. The CMA estimates that more than 100 physician groups have gone bankrupt or closed in the past three years.

Now, doctors are turning to unionization as a method of regaining some of their lost clout.

The 800 doctors employed by Los Angeles County voted to unionize in May and contract negotiations are currently underway. A union drive is also ongoing among the interns and residents at UCLA Medical School.

"I kind of came along, fortunately or unfortunately, under the old (fee-for-service) system," Pearsall says. "Now we have managed care. I've seen both ways, and it gets kind of frustrating. The old way, you didn't have to feel like 'I must see all these patients to get paid appropriately for what I do.' Now, you have to deal with that, and of course, the most important thing is that you have to do it and do a good job."