Biggest Doctors Group in State to Shut Valley Unit

The state’s largest physicians group will stop doing business in the San Fernando Valley on Aug. 31, a move that could force up to 70,000 patients in managed-care plans to switch doctors.

The decision by Huntington Provider Group to shut down its Valley operations, called the Southern California Independent Practice Assn., marks the second time this year that a company formed to help doctors navigate the perils of managed care has run into trouble. In March, state regulators took over MedPartners Provider Network Inc., a division of the nation’s largest physician practice management company, and thrust it into bankruptcy.

“This is a difficult environment,” said Dr. Barton Wald, president of Pasadena-based Huntington Provider Group. “We’re all struggling to keep our health-care costs in line with our revenues.”

The failure of the San Fernando Valley division, which was purchased by Huntington Provider Group in 1995, illustrates a key aspect of growing financial troubles of managed care in California.

Organizations such as Huntington, called independent practice associations, collect monthly fees from health maintenance organizations and use the money to pay for all aspects of patient care for the HMOs’ members, from checkups to hospital visits.

Because they must pay for everything out of a fairly small fee, called a capitation fee, the associations are the most vulnerable to the financial troubles rocking the managed-care industry.

This difficult task was made worse in the affluent West Valley, where the division operated, in part because doctors and hospitals demanded higher fees there than in the San Gabriel Valley and Ventura areas, where the company has other operations, sources said.

“We really did strive diligently to build a successful organization,” said Wald, whose organization provides care for 400,000 people in Southern California. “However, because of many of the challenges that face medical groups and [independent practice associations] today, we found our task very difficult.”

For patients, Huntington’s decision to shut its Valley operations could mean serious disruptions as their doctors switch to new independent practice associations or quit managed care altogether.

Dr. Charles Goodman, a West Hills pediatrician who is a member of the association, said he is particularly concerned that patients will not be properly notified of the changes or their implications.

“It’s going to hit home when the San Fernando Valley patients start going to their doctors and they find out they aren’t their doctors anymore,” Goodman said.

The closure of the Southern California Independent Practice had been rumored for several weeks, causing great concern among doctors, patients and hospitals. The association provides care for 70,000 residents of the West San Fernando Valley and is affiliated with 400 doctors, most of whom practice at West Hills Hospital and Northridge Hospital Medical Center.

In a letter mailed Tuesday to health plans, doctors and hospitals, the company said it would cease operations Aug. 31 but would aid those affected in finding new doctors or new physician groups.

The shuttering of the financially troubled operation will mean that doctors must find new associations to join or risk losing their managed-care contracts. Health plans, meanwhile, must either move the patients to the new associations, along with their doctors, or find new physicians altogether.

“We have already begun the transition process,” said Jim Harris, spokesman for Cigna Healthcare of California.