Physicians Medical Group of Santa Cruz links with Dignity Health

March 19--SCOTTS VALLEY -- It's a sign of how times have changed in health care -- the top-rated and fiercely independent Physicians Medical Group of Santa Cruz has agreed to affiliate with Dignity Health Medical Foundation.

Dignity Health Medical Foundation, founded in 1993, supports 1,500 employed and independent health care providers in California.

Physicians Medical Group of Santa Cruz, founded in 1994, is a network of 250 doctors operating independent practices at 100 locations in Santa Cruz County. Among those 250 doctors are 62 employed by Dignity Health Medical Group -- Dominican. A letter will go out to the 20,000 people who have a health maintenance plan through Physicians Medical Group about the agreement, which was in discussion for two years and is slated to take effect in July:

--Dignity Health Medical Foundation will acquire Physicians Medical Group's HMO administrative functions for an undisclosed price.

--The independent physicians will affiliate with Dignity Health Medical Foundation.

--Physicians Medical Group will change its name to Dignity Health Integrated Network.

"We needed to grow our network," said Dean Ward, vice president of operations at Dignity Health Medical Foundation, who helped open a clinic in Woodland in 2015 and has experience with Sutter, Kaiser Permanente and Health Net. "For us to become competitive in the market, the PMG affiliation made a lot of sense... A group like this has economies of scale."

Ward, who has a background in behavioral health, has heard about the need for that specialty locally.

"We're recruiting a psychiatrist," he said.

Early innovation

Dr. Robert Weber, a family physician who has practiced nearly 30 years in Watsonville, recalls how he was invited to a meeting of doctors concerned about managed care, where health care insurance plans aim to provide care at the lowest possible cost.

"It grew into this amazing organization," he said.

In the days before Google, email and smartphones, Physicians Medical Group purchased fax machines for each doctor's office, a burdensome expense for a solo practitioner.

That morphed into a sophisticated email system and then to the health information exchange, "one of the pioneers in the country," Weber said. "All of it flows more smoothly. It was funded by PMG, but it benefited our entire practice."

The exchange links hundreds of doctors, hospitals, safety net clinics, labs, radiology centers and surgery centers, transmitting clinical data providers need about their patients, with their consent.

Another PMG initiative supplied machines in doctor offices to do the hemoglobin A1c test for patients with diabetes, monitoring their blood sugar levels.

"It made a huge difference," Weber said. "We're using it on all our patients."

He is part of a national data-gathering network based at the University of South Carolina School of Medicine, where he is the top 10 percent of doctors improving the quality of care for patients.

Consolidation

The doctors who own Physicians Medical Group of Santa Cruz had been approached about mergers before, but had no interest, said Marvin Labrie, the group's CEO for 20 years. Now "an overwhelming majority" of PMG doctors support affiliation.

"Quite frankly it's time," said Labrie. "We're too small now to participate in contracting...The Affordable Care Act is certainly a variable."

Since the law was signed in 2010, consolidation has ramped up nationwide among insurers, hospitals, doctors and pharmaceutical companies.

The four largest insurers -- Blue Shield, Anthem, United and Aetna -- saw their market share grow from 69 percent in 2006 to 77 percent in 2014, giving them more leverage to set reimbursements to doctors.

Although mergers often result in layoffs, "everyone here is being offered jobs," Labrie said.

He hopes the affiliation will attract a Medicare Advantage plan to Santa Cruz County. Humana, the only insurer to offer Medicare Advantage in the county last year, exited this year.

A benefit for patients is having more services in one network, said Dr. Anne-Marie Jackson, president of PMG's board of directors, citing the example of a patient having surgery at the hospital or undergoing chemotherapy.

She affiliated with Dignity Health Medical Group -- Dominican three years ago.

The high cost of Santa Cruz

Another way to grow would be to build a clinic, but that was not deemed feasible.

"It's really expensive to build a clinic in Santa Cruz," Ward said. "It's difficult to recruit physicians. The cost of living is high."

Doctors coming out of medical school and residency often have $200,000 in debt. They want to start a family. Home prices -- the median price hitting $800,000 locally -- are daunting.

"We tried for years to recruit," said Jackson, who found new doctors are not interested in a private practice, which requires the expense of electronic health records and tracking various measures as a way to improve medical care.

"They haven't been taught the business of medicine," said Ward.

"A lot of physicians want to have a real life," said Labrie.

Relationships

In 2012, Physicians Medical Group of Santa Cruz began working with Dignity Health Dominican Hospital and Blue Shield on a three-year initiative to provide integrated and cost-efficient health care to 8,000 people in Santa Cruz County with a Blue Shield HMO plan.

The groups were aiming to keep the cost trend at 3.6 percent in 2015 after experiencing a 4.5 percent increase the two years before.

Those involved gathered claims data, examined clinical cases driving up costs -- including diabetes, opioid overuse, hospital readmissions and patients using more drugs than medically necessary. This initiative, known as an accountable care organization, resulted in savings for the hospital and for Physicians Medical Group.

The first two years uncovered more opportunities for savings than the second year. One example was stabilizing use of the emergency department. Another was smoother transitions between the hospital, nursing home and home care.

The collaboration "resulted in one of the most competitively priced health care options in Santa Cruz County," said Brooke Burgess, Dignity Health Medical Foundation's director of public relations.

Integration

Dr. Michael Coulson, a family doctor at Scotts Valley Medical Clinic, which is a part of the Physicians Medical Group network, sees benefits for patients in the affiliation.

"I sent a number of patients today to Dignity Health's lymphedema clinic," he said. "They have a vestibular clinic for dizzy patients. Having those resources is very important to us. You can develop relationships with other speciality providers."

His practice is about 40 percent HMO patients, 30 percent Medicare and 30 percent in a preferred provider organization plan.

His wife's family is from Soquel, which is what brought him here 17 years ago after graduating from Tulane University School of Medicine and a residency at Natividad Medical Center in Salinas. The couple has two sons at Santa Cruz High.

Coulson feels fortunate that with the support from colleagues, he was able to coach his sons' soccer and lacrosse teams. "You want your independence and you want to take advantage of services a larger organization has to offer," he said. "You want the best of both worlds."

PHYSICIANS MEDICAL GROUP OF SANTA CRUZ

What: 250 physicians, includes 40-plus primary care doctors accepting new patients, 42 specialties, and a team of patient care coordinators.

Where: 100 locations in Santa Cruz County

Urgent care sites: Dignity Health Medical Group Urgent Care, 1820-C 41st Ave., Capitola, open noon to 8 p.m. daily, and Pinnacle Healthcare, 99 Airport Boulevard, Freedom, Monday through Friday 8 a.m. to 6 p.m.

Information: Pmgscc.com/.

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