Physician growth ratio falters as income levels stall.

Managed care plans cut into doctors' paychecks

Dr. Sonny Cobble used to have one of the most high-profile sports medicine jobs in Los Angeles as head orthopedist for the Los Angeles Marathon. But last year, he packed up his stethoscope and headed for Oklahoma.

"I was constantly getting calls from around the country asking me if I wanted to practice somewhere else," said Cobble, who now makes his home in Tulsa. "I always just said, 'No,' without a second thought. But over time, living in L.A. became less and less appealing."

Cobble is part of an apparent migration of medical specialists out of California, a response to crime, urban blight, natural disasters - and, perhaps most importantly, the growing dominance of managed care.

California has the nation's highest rate of physician participation in managed care plans. In 1994, California doctors derived 44 percent of their revenues from managed care, while U.S. doctors outside California derived only 32 percent of their revenues from managed care, according to a study by the American Medical Association.

While some Southland doctors have embraced managed care, many are disgruntled by the paperwork and lower income it has produced. Although Cobble said his decision to move was finally made after his wife was mugged at high noon in downtown Los Angeles, he complained that managed care pricing systems were making it very difficult to practice in California.

"It puts a tremendous hardship on physicians when the (price) ceiling goes down every year and the cost of operations goes up every year," Cobble said.

Stalled growth

Statistics show what appears to be healthy growth in the supply of physicians in California. In 1994 there were 76,411 licensed physicians in the state and 23,370 in L.A. County, compared to 66,438 in the state and 21,145 in L.A. County in 1988, according to the Medical Board of California. But the AMA report reveals some interesting facts behind the numbers.

The number of physicians is indeed going up, and the ratio of physicians to the rest of the population remains greater in L.A. County and in California than in the nation as a whole (see accompanying graph). However, while the physician-to-population ratio continues to grow rapidly for the nation as a whole, the ratio's growth in California and L.A. County has stalled in recent years.

The AMA looked at the number of doctors per 100,000 citizens and found that the ratio grew only 0.2 percent between 1990 and 1993 in California, compared to 2 percent growth nationwide. In L.A. County, the physician-to-population ratio grew by 0.5 percent in that time period.

Meanwhile, physician incomes have stopped growing entirely in California (see accompanying graph). In 1989, the state's doctors enjoyed an average of 10.5-percent growth in their salaries over the previous year, according to the AMA report. By 1993, salary growth stood at 0 percent in California, while doctors in the rest of the country averaged 5.6-percent increases.

Specialists have been particularly hard hit by the advent of managed care. There are no statistics on the number of specialists who have left the state in recent years, but anecdotal evidence is compelling; almost every specialist contacted by the Business Journal could cite colleagues who have fled for greener pastures in other states.

"Many of the physicians who are leaving are finding communities that welcome them, and in the old fee-for-service mode," said David Langness, spokesman for the Health Care Association of Southern California, a trade group representing more than 250 Southland hospitals.

Langness said two specialist acquaintances left to practice in Kansas, where they made twice as much money in their first year as they had the previous year in California. Although the transplanted specialists recognize that managed care will eventually come to Kansas, they suppose they can at least enjoy high salaries for the next few years, Langness said.

"There's always this combination of the social reason and finances," said Dr. Marvin Kaplan, past president of the Long Beach Medical Association. "I think doctors are leaving California for two reasons: One, they want to bring up their children in a safer, nicer environment, and two, they're finding better opportunities elsewhere."

Industry experts said the flight of specialists from California is unlikely to have much effect on the health care industry, mainly because the state has too many specialists to begin with.

"In California, the ratio of specialists to generalists is 70-30," Langness said. "A lot of people are saying it should be 70-30 the other way."

One of the primary goals of managed care is to reduce health care costs by using high-priced specialists less often and relying more on primary care physicians to supply the vast majority of medical services. Although these doctors often call in specialists when needed, most HMOs employ far fewer specialists than primary care practitioners.

While Kaplan agreed that California may still have an oversupply of doctors, he said he is worried about a disturbing trend he has noticed in the type of physicians leaving the state. They tend to be brilliant young doctors at the height of their careers, he said.

"These are not marginal people; these are the top-of-the-rung people," Kaplan said. "From a business standpoint, maybe it's good some doctors are leaving, maybe we have too many doctors. But are we losing the wrong people?"