Out of practice
By Nathan Welton
The Beacon

According to the local rumor mill, a recent attempt by a Santa Barbara heart surgeon to recruit a partner — a thoracic surgeon capable of earning a healthy six figures — failed miserably.

The reason: Santa Barbara was too expensive.

As the costs of living and practicing medicine in paradise continue to soar, Santa Barbara’s doctors and medical personnel are aging — and employers are having a difficult time finding replacements. As a result, experts suggest the community is on the brink of a crisis that could ultimately affect the quality of local care.

“Because of our tremendous lifestyle and the beauty of this place, we never had problems in the past attracting top-notch physicians — and plenty of them — and most have accepted less income to come and live here,” said Dr. Robert Reid, director of medical affairs at Cottage Health Systems. “But the equation is changing.”

Nationwide megatrends and quirky local phenomena have conspired at the wrong time to cause headaches for health-care headhunters, who continually hear the same complaints from their recruits: medical school loans are crippling, South Coast housing is too expensive, malpractice premiums are up and insurance reimbursements in the area are disproportionately low. In short, California, and Santa Barbara in particular, has become a difficult and somewhat undesirable place to practice medicine.

Of 90 responding South Coast physicians in a 2001 California Medical Association survey, 8 percent planned to move out of state, 33 percent planned to retire early and 22 percent reported difficulty in recruiting new doctors. What’s more, only one in five physicians in Santa Barbara said they’d recommend a medical career to their children.

Adding to the unease is the fact that, nationwide, medical school graduates have increased just 12 percent in the past two decades, compared to a 24 percent population surge during the same time — so there are relatively fewer doctors now than in the past. As a result, less are moving to California, which ranks 47th in physician density, alongside places like Alaska and Oklahoma.

“So we have an aging medical staff,” Reid said of Cottage, where only 17 percent of doctors are in their 30s, half of them are over 50 and nurses average 48 years old.

“We have gained some physicians, but if you look at it, there are some critical shortages emerging — general surgery, neurosurgery, a shortage of anesthesiologists — and the recruitment process can be long and protracted,” he added.

Dr. Kurt Ransohoff, chief executive officer of Sansum Santa Barbara Medical Foundation Clinic, said only about 10 percent of resident physicians remain in town, searches for certain specialists have lasted as long as a year and one recruit turned down a job at the clinic saying he’d work anywhere but the South Coast. His reason: Santa Barbara didn’t live up to its expense.

“We’d flown him here twice and spent weeks or months pursuing him, but this sort of thing is becoming very usual,” Ransohoff said.

One of the major problems, according to local physicians, is that doctors elsewhere aren’t mired in as much regulation and bureaucracy as they are here.

Medicare, for example, regards the expense of practicing medicine in Santa Barbara similar to that in other Central Coast cities like Santa Maria or San Luis Obispo. A series of formulaic snafus in the 1980s zoned the South Coast in with other low-cost areas, so that reimbursement here is significantly less than many other places in California.

“Here’s the problem: Medicare reimbursements are set regionally. It turns out that we get, in spite of the fact that everyone knows Santa Barbara is an expensive place to practice, the lowest reimbursement in the state,” said Dr. Andrew Binder, a local lung specialist.

“We get the same reimbursement as guys in farm country, with low rent and housing expenses, and this affects both physicians and hospitals.”

And although Medicare rates have increased in recent years, doctors still aren’t satisfied, because payments haven’t kept pace with medical inflation. According to the Santa Barbara County Medical Association, South Coast physicians’ expenses increased some 30 percent over the last five years while Medicare rates increased only 10 percent. Other insurance reimbursement rates are also sub-par, they said, compared to places like Los Angeles or San Francisco.

“What we charge almost has no bearing on what we’re paid,” said Sansum’s chief administrative officer, Paul Jaconette. “If malpractice goes up, and we raise our prices to compensate, the insurance companies will say, ‘Too bad, we’re not paying you any more.’ No other industry has done this to itself.”

To get an idea, say Medicare allows a certain specialist to bill about $57 — a real number — for a 25-minute office visit and will reimburse that doctor 80 percent, resulting in an hourly gross rate of about $90. Subtract from that overhead, supplies, ensuing phone consultations and malpractice premiums that can creep above $200,000 a year, and the doctor may take home $40 an hour or less. It’s still an attractive income for most, but is sometimes hard to swallow for physicians — and especially those living here.

“I had four years of college, four years of medical school, an internship, a year of general surgery, and four years of specializing — and I didn’t get out until I was in my mid-30s,” said Dr. J. Glenn Bradley, a local gynecologist. “Doctors have to pay their own benefits and they start later in life. My colleague in Santa Maria, with her husband (who is also a physician) had a $500,000 medical school loan, so the cost of becoming a doctor is very, very expensive.”

To further complicate matters, doctors said the Medicare reimbursement system is so complicated and arcane that they have to either pay billing agencies or brave the bureaucracy themselves and risk errors that could lead to costly audits.

“I used to say I feared nobody, not even death — well, maybe the IRS — but now I have to include Medicare as part of that,” said Binder. However, he added, he has to deal with it because “Medicare patients are about 30 percent of my practice, so my choice is accepting it or quitting.”

Because reimbursement rates are so low, many private-practice physicians now refuse to accept insurance altogether, and local employers pay their doctors 15 percent to 30 percent less than other places. It’s worse for higher-paid specialists, who stand to make almost half as much as they would practicing in less expensive communities out of state.

“Medical residencies will cut back on trained specialists, and if they’re in high demand (and will get paid more elsewhere), why come here?” asked Jaconette. “In Santa Barbara, the ability to provide and meet patient expectations with specialists may change.”

He added that if things don’t improve, he could imagine patients having to routinely drive to Los Angeles for specialized treatments.

To try to make the community slightly more attractive, Sansum now offers hiring packages with several-thousand-dollar housing assistance bonuses, but “it’s still a drop in the bucket,” said Ransohoff.

Cottage has implemented a similar signing bonus policy, but it seems that new doctors, when they’ve been making $35,000-a-year during their residencies, have problems bankrolling $900,000 houses — and property taxes — on the South Coast while concurrently paying off quarter-million dollar student debts that, in some cases, equate to a second mortgage.

Ransohoff cites one South Coast doctor who realized he could either pay off his student loan in five years in Georgia or 25 years in Santa Barbara. He split.

But there are fixes — albeit complex ones, some of which are society-wide — that can stabilize the situation.

To begin with, doctors say, housing prices will need to stabilize, and Medicare will have to pay more — which will require hefty legislative brawn.

“The program needs to be tinkered with,” said Reid, “but it’s such political dynamite that everyone’s afraid to mess with it.”

Also, insurance premiums and co-payments will have to increase in order to fund more appropriate private insurance reimbursements — and this won’t come easy.

“Society feels entitled to health care … (but it) is somewhat dictated by an individual’s willing to pay,” said Jaconette. “What is health care worth? We go out to dinner and pay $40 for a steak, but not $50 for an office visit with someone who can save our lives.”

Lastly, according to physicians, malpractice rates will need to drop, which would require a decrease in the number of spurious lawsuits that are frequently settled less expensively out of court. Certain states have placed caps on maximum malpractice awards, but the industry is affected nationwide when, for example, someone wins $140 million, which is what recently happened in New York.

So it seems that Santa Barbara is stuck in a rut and needs to claw its way out.

“Ten years ago, Santa Barbara was our biggest asset in terms of recruiting, but now,” sighed Ransohoff, “it’s our biggest liability.”