A state-guaranteed loan program designed to help small physician groups and non-profit health clinics upgrade their facilities is off to a slow start, with only two loan applications being submitted since the program began last fall, state officials said.
To get Medi-Cal reimbursement under the managed care system, many of these small groups need to substantially upgrade their facilities, including buying better medical equipment and modifying their clinics to conform with the Americans With Disabilities Act.
To help these clinics and physician groups fund improvements, the state Legislature last year approved Assembly Bill 1230 by Assemblyman Roderick Wright, D-Los Angeles.
The law provides a state guarantee for small-business loans issued by banks to doctors and health clinics upgrading their facilities to gain Medi-Cal compliance.
As a result, loans typically offered at 11 percent would be available for about 9 percent.
“It’s a new tool,” said Denise Arend, director of the state Office of Small Business, which is overseeing the program. “It is going to take a while before doctors learn about the program.”
But efforts to spread the word about the program have drawn little response. More than 4,000 physicians were invited to attend a loan seminar on the program sponsored by L.A. Care Health Plan, the umbrella organization for Medi-Cal managed care, and Citibank Corp., which is one of the banks offering the loans.
Only 10 doctors showed up, according to L.A. Care spokesman Keith Malone, and as a result three other loan seminars were canceled.
“Doctors don’t see the need yet,” said Malone. “But for some of them to compete, they will have to upgrade their systems. These loans are there to help them out.”
The 9 percent interest rate may not be good enough, according to Richard Veloz, director of government relations for L.A. Care.
“We are talking to members (of the Legislature) to try and (lower the rate),” said Veloz. “We are hoping we can make it happen by early next year.”
Wright said he sponsored the legislation to ensure that doctors serving his South Central Los Angeles-area constituents would be able to remain in business.
“The new system is very different,” said Wright. “(Doctors) have to meet a lot of requirements they didn’t have under Medi-Cal. I wanted to make sure the doctors will still be able to serve my community.”
Citibank is offering two types of loans for the doctors. One allows physicians to borrow up to $250,000 for inventory or machinery, or to finance working capital or renovate offices, according to a brochure put out by the bank and L.A. Care. The other loan will allow doctors to borrow up to $100,000 without providing income tax returns to the bank.
Doctors and industry experts say many doctors are not interested in the loans because they are not making enough money to pay them back.
“Many of the Medi-Cal doctors have been treating Medi-Cal beneficiaries for years, and this will be very costly for them,” said Jim Lott, senior vice president of the Healthcare Association of Southern California. “Many of them live month to month. Their income is sparse and they don’t have reserves to make changes for the new program.”
Dr. Steven Feig, a pediatrician who treats Medi-Cal patients in South Central Los Angeles, said he is concerned about paying back a loan.
“There are no guarantees that you are going to get the number of patients you need to meet the overhead,” he said. “If you don’t get the number of patients you need you won’t be able to pay off the loan.”
A random sampling of doctors offices conducted by L.A. Care found that 33 percent either did not comply with the Americans with Disabilities Act (mostly ensuring access for the disabled), lacked necessary computer equipment, or lacked medical equipment to meet the managed care standard.
“(Doctors) minds are not attuned to all of these changes,” said Dr. Gary Krieger, a pediatrician who serves Medi-Cal patients in San Pedro. “Some letter or individual shows up with new regulations and they are aghast. It has not hit the individual doctor personally. There is going to be a big problem with the transition.”
The California Department of Health Services has aggressively pushed the managed care model in Los Angeles and 11 other counties as a remedy for a traditional Medi-Cal program afflicted by runaway costs and fewer patient choices.
Under the L.A. Care group, doctors receive on average $11.50 per patient per month, according to Malone, adding that each plan is different and the fees may vary.
Undaunted by the slow response, Malone said that starting this month, L.A. care officials plan to attend physician meetings at area hospitals to try to recruit doctors who will have to upgrade their practices to stay in the managed care system.