The Basics of Independent Practice Associations

November 18, 2012

Here's a primer on independent practice associations. Not all are created alike, so be aware of the differences.

Independent Practice Associations (IPAs) can eliminate the isolation, headaches, risks, and expense associated with independent private practice, while preserving your independence. IPAs can eliminate much of the duplication of expenses, such as office management, EHR compliance, coordinated care systems, and case management systems, and certain IT hardware.

As state and federal governments seek to encourage cost savings measures which are equal parts “carrot” (shared savings plans or accountable care organizations) and “stick” (fraud and abuse enforcement) now more than ever, circling the wagons through the formation of IPAs would seem to be clearly indicated. There are several types of IPAs, with different characteristics and goals. Not all are created alike - so you will need to be aware of the differences.

The most common type of IPA in California and the West Coast, are those in which the IPA negotiates a managed care contract under a capitated HMO-style medical services agreement. These are also the type of existing IPAs which are most readily able to convert to an ACO model, because they are accustomed to capitated risk-sharing models.

In other areas of the country, (Texas, in particular) IPAs were initially thought to be a useful way to collectively bargain for higher payments under fee-for-service insurance plans. The idea was that physicians could band together and refuse to treat patients in a town unless the insurance plan agreed to meet the IPA members agreed upon minimum price. If enough physicians banded together, the insurance plan would have no choice but to meet the IPA’s terms. While this seemed like a great idea to the physicians, it is what the FTC termed in 2005, a text-book example of “wheel and spoke” criminal horizontal price fixing under the Sherman Anti-Trust Act. Here's a very good summary of what the FTC considers illegal, beginning on page 21.

In part, because price fixing is illegal, IPAs in non-HMO country began to focus upon benefits of sharing of costs, and administrative overhead for independent physicians. Today, the government is pushing everyone toward HMO- style shared savings ACOs. IPAs which become clinically integrated could provide the very model for this change. Here's an excellent article on this topic from Marisa Torrieri of Physicians Practice.

As a physician considering joining an IPA, before you sign anything, you should consult a healthcare attorney to review all documents. IPA agreements are notorious for being short and seemingly simple on the front end, while incorporating by reference many other documents which you agree you have read and understood, when you really haven’t, and you really don’t. (Under contract laws in most states, you are bound by anything you should have read before signing, but failed to do so.) An experienced a health lawyer can also ensure that Stark Law and Anti-Kickback Statute issues have been addressed in the contracts.

There will be much more in the coming months on the conversion of IPAs into ACOs in Physicians