The pros and cons of joining an independent Physician Association (IPA)

What is an IPA?

An independent physician association (IPA) is a business entity owned and organized by a network of independent physician practices for the purpose of reducing overhead costs or pursuing business ventures such as contracts with employers, accountable care organizations (ACO) or managed care organizations (MCOs).

IPAs contract with independent physicians and will then provide the services of the physicians to managed care organizations on a negotiated per capita rate, flat retainer fee, or negotiated fee-for-service basis. An HMO or other managed care plan may contract with an IPA which in turn contracts with independent physicians to treat their members at a discounted fees or on a capitation basis. IPAs can also contract with hospital systems and Accountable Care Organizations.

Benefits of joining an IPA

Optimally functioning IPAs can offer many potential benefits, including:

  • Appropriate alignment of physicians’ financial incentives
  • Efficiencies in practice administration and management
  • Political influence within the medical and broader provider community
  • Peer support
  • Optimized facilities
  • Increased ability to negotiate favorable contracts with other entities such as MCOs, ACOs, radiology, laboratory, and hospital systems
  • Independence and local financial and care management control in managed care
  • Improved services including, extended hours, urgent care, outreach services for prevention, telephone triage, and follow-up expertise

Risks of joining an IPA

Physicians considering the development of, or participation in, an IPA should be aware of the potential risks which include:

  • Underfunded capitation revenue, with risk of significant losses and/or bankruptcy
  • The trend of payers to decrease their payments to the IPA
  • Conflicts of interest for the physician between financial gain and optimal care for the patient
  • Restrictions on collective bargaining by physicians from the Federal Trade Commission and Department of Justice
  • Significant separation between primary care physicians and contracted limited specialists