County Medical Contracts Sewn Up, Critics Say

Ventura County spends more than $22 million each year to hire doctors to serve the poor, using noncompetitive contracts that critics say amount to sweetheart deals that should be open to bidding.

A Times analysis shows that 50 of those contracts exceeded $50,000 last year. Nine contracts were worth more than $1 million each. The most lucrative paid nearly $2 million to Dr. Miguel Cervantes, the operator of a bustling south Oxnard clinic.

For years, when insurance companies let private physicians set their own fees, these public contracts were hardly considered plums. Now, with private physicians being squeezed by tightfisted HMOs, these contracts are more attractive, especially since they often cover hefty overhead expenses such as rent and malpractice insurance.

But local doctors who want to bid on contracts at the county hospital and its network of clinics say they have found a closed society built on personal relationships and perpetuated by habit.

Dr. Leland L. Sprague is one of those who wants a piece of the action. And he thought he had a good shot a few years ago, when he underbid the county’s chief anesthesiologist by about $200,000, he said. He still lost out to the doctor who had held the county contract for many years.

“The whole system is based on close-knit associations,” said Sprague, 68, now a doctor in Ojai. “We feel that taxpayers are the losers, and we wonder what sort of oversight the Board of Supervisors is using in all of this.”

Adding fuel to the controversy is a nasty six-year feud between the county’s hospital and private Community Memorial. Critics say county officials have hired doctors who sided with them.

Dr. Samuel Edwards, administrator at the county hospital, offers no apologies for a system of medical care he says is already high-quality, efficient and a bargain for taxpayers.

“I’m very proud of the doctors I have for the money I spend,” he said. “I’d challenge anyone to do better.”

It’s true, Edwards said, that the county staffs its health care system without a formal bidding process. But you can’t build a stable medical staff based on low bids, Edwards said.

Instead, the county hires experienced local physicians and keeps them together as a team to treat patients and to teach 39 young doctors-in-training at the general hospital.

“The bottom line is that all physicians are not equal,” Edwards said. “You don’t pick the cheapest one. Getting the right mix of physicians to do what we need is very difficult.”

Ventura County’s health care system exists to provide a safety net for the indigent and working poor--about 25% of all local residents. Founded a century ago, the system employs about 120 doctors to staff its 180-bed general hospital in Ventura and to direct 21 far-flung clinics. Together they provide services ranging from brain surgery to emergency medicine. At The Times’ request, the Health Care Agency compiled a list of the county’s top 50 physician contractors in 1998 based on overall payments.

The amounts ranged from nearly $2 million for Cervantes to operate the 10-doctor Las Islas clinic to about $52,000 for a group of Ventura lung specialists paid on a per-surgery basis. Five physicians who both headed departments at the county hospital and operated community clinics held two large contracts each in 1998:

Pediatrician Christopher Landon was paid nearly $1.9 million; obstetrician Robert Lefkowitz was paid nearly $1.7 million; family practitioner Joan E. Baumer was paid about $1.3 million before moving away at midyear; general surgeon James Holden was paid about $1.15 million; and internist Robert Gonzalez, medical director of the clinic system, was paid nearly $1.1 million after taking over operation of a Baumer clinic for six months.

Those totals reflect all payments for service, and do not show how much contractors cleared after paying their employees and covering an array of expenses not reimbursed by the county.

Contracts Attractive to Outsiders

Many local physicians say those county contracts look good to them, and they want a chance to bid against current contractors.

“Competition is what democracy is all about,” said Dr. Gus Iwasiuk, a Santa Paula general surgeon and former president of the Ventura County Medical Society. “A free economy wants open bids and wants an open market. That may hurt individuals’ feelings, but it doesn’t hurt quality.”

Dr. John Keats, medical director at Ventura-based Buenaventura Medical Group, said his 40-doctor partnership would like a chance at the county contracts, which are automatically renewed every year. Particularly attractive to Keats, an obstetrician and gynecologist, is the county’s $1.1-million contract for women’s care.

“I certainly believe it is possible for my organization to provide those obstetric services at a cheaper rate,” Keats said. “Do they really need four full-time obstetricians over there? I don’t think so.”

Likewise, Dr. Siegfried Storz, former chief of staff at Community Memorial who practiced at county hospital for 26 years, said he would consider bidding for the county’s half-million-dollar cardiology contract if he could.

“That’s more than beer money,” he said. “I think it’s a good deal.”

In fact, Dr. Richard Reisman, director of Community Memorial’s rival, privately operated clinic system, said he has heard from physicians that they are paid more at the county hospital than they made in private practice.

Reisman and others said they have tried to figure out how much money the physicians who run the county’s community clinics make, but couldn’t because complicated formulas are used to determine compensation.

“Those figures are always carefully camouflaged,” Reisman said. “The real issue is what do [physician-administrators] rake off after they’ve paid other doctors for their service.”

County officials claim doctors who operate community clinics receive administrative stipends up to $2,500 a month but make no profit beyond that.

For example, Cervantes, a family doctor who helped found Las Islas clinic in south Oxnard in 1992 and is now its president, “has never made a penny in profit,” said administrator Bill Wood.

“Dr. Cervantes makes money the old-fashioned way--he works for it,” said Richard Ashby, medical director at Ventura County Medical Center and longtime manager of physician contracts. Because Cervantes makes money as both a full-time doctor and an administrator, he makes about $150,000 a year, Ashby said.

Considering Cervantes’ responsibilities in running a 31-employee clinic, that compares poorly to family doctors in private practice, Ashby said.

And unlike family practitioners who work for Keats on salary at Buenaventura Medical Clinic, Cervantes has no paid vacation, retirement or employer health plan--benefits that could add 20% to a physician’s compensation.

Ashby said he hires family practitioners at the county’s general hospital for a starting annual wage of about $100,000 to $110,000. He made three recent hires from out of state because he could not find primary care doctors locally to work for what he pays, Ashby said.

That may be true, Keats said, but county contractors have outbid him twice in recent years when he was trying to hire young primary care doctors.

Family doctors at the Buenaventura clinics make $100,000 to $126,000 a year plus benefits, said Chief Executive Officer James Malone. Nationwide, the typical family doctor netted $132,400 in 1997, according to Medical Economics magazine.

“Anyone working here is not getting rich,” Ashby said. “When I have a position open, and I go out to good physicians in the area, 98 times out of 100 I’m turned down.”

When doctors do show interest in a county contract, they often want it on their terms, Edwards said. They usually don’t want to give up their private practices to commit themselves to public medicine, he said.

“There are a whole bunch of people who come from the outside and tell us how we ought to change our system so they can join,” said the county hospital administrator. “Well, if they want to play our way, we’ll give them very serious consideration.”

The county--always fighting to cut expenses at its money-losing general hospital--is keenly sensitive to physician costs, Edwards said.

So although county contracts are never offered to all comers for bid, proposals are welcomed from outside physicians, he said. In fact, the county solicited several bids when its emergency room contract was available in 1997.

“The filtering process is alive and well,” Edwards said.

But Edwards and Ashby say they won’t rush to replace doctors who have provided loyal service for years just to save a little money--or just because times are a little tougher financially for private doctors just now. Don’t forget, they said, many contractors gave up their practices to work for the county.

Public Versus Private Practice

Surgeon James Holden is one of those.

For decades, the county hospital rotated surgeries among all local general surgeons. They would operate at reduced fees when their private practices allowed--a traditional volunteerism that unified the physician community. But it was inefficient and ended up costing too much, officials said.

“We were at the mercy of physicians in the community, and we weren’t their first priority,” Ashby recalled. “We had [serious] problems with one patient because we couldn’t get a surgeon here when we needed one.”

So in late 1992, hospital officials essentially fired 10 part-time surgeons, saving $300,000 a year but angering doctors who thought they had been rudely discarded.

Holden left his private practice to run the hospital’s reorganized surgery unit that repaired hernias, removed cancers and gall bladders, and mended ruptured livers and spleens.

“I asked all the general surgeons involved at the hospital and only three were willing to help me,” Holden said.

Yet Holden’s Tower Surgical group has now grown to four full-time and five part-time physicians. They operate on patients, run surgical clinics for adults and children, and teach residency-level doctors.

“From my point of view, the county gets a much higher level of service from hiring people who are committed to county patients,” Holden said.

The Holden contract was worth $1.06 million last year. But Holden said he and his full-time doctors were all paid below market. One earned $162,000 a year, two made $132,000 each and Holden got $120,000, plus another $81,000 from a separate contract as the hospital’s director of surgery, he said.

That pay compares with a median net income for the nation’s general surgeons of $182,000 in 1997, Medical Economics reported.

‘We Have Mature Systems of Care’

Officials say Robert Lefkowitz, director of obstetrics and gynecology at the county hospital for 19 years, should remain the logical choice when the county awards its annual contract for women’s care.

“We have mature systems of care here, and obstetrics is a good example,” Ashby said.

Lefkowitz and his three full-time partners have perhaps 60 years’ experience among them, Ashby said. Like most county doctors, those veterans are prepared to treat patients and teach young doctors, he said. As a result, the county’s $1.07 million OB-GYN contract is maybe “a little on the high side,” compared to other county contracts, Ashby said.

But some of that money is spent on two part-time doctors who cover for Lefkowitz’s group on evenings and weekends.

“We do a lot of teaching, lectures, consultation, primary care and administration,” Lefkowitz said. “It’s not just a monetary thing. It’s not just a job.”

Lefkowitz would not say how much money he and his partners clear from the contract. But Ashby said the amount is less than the $180,000 to $250,000 Buenaventura pays its obstetricians. Nationally, the typical obstetrician nets about $199,000 a year, according to Medical Economics.

Yet Keats of Buenaventura said he would like to know how many babies the county’s four obstetricians still deliver personally, since only about 1,800 are born at county hospital each year, about half the number a decade ago. Numerous other doctors also deliver babies there, he said.

“But precisely what their contract entails, I wouldn’t know without a formal request for proposals from the county,” Keats said. “And that’s what we’d like to see.”

A Matter of Honor, Not Money

It is Dr. Mark Sussman’s $1.18-million anesthesia contract that disgruntled physicians often cite as proof that the county’s system for hiring doctors is insular and wasteful.

And it is Leland Sprague’s bid against Sussman they cite as evidence.

“I thought they should have given it to Lee Sprague,” said Dr. Jack Broms, a retired orthopedic surgeon. “He’s a good, reliable doctor and he managed their anesthesia program for years.”

Sprague, who was coming out of retirement after a business setback, said his bid was $200,000 below what Sussman was paid in 1995. But the county wasn’t interested.

“They said, ‘Thank you very much because your offer enabled us to get our guy’s contract down,’ ” Sprague recalled.

Ashby confirmed that Sprague underbid Sussman but remembered the amount as about $100,000.

Ashby said he rejected the lower bid because Sprague had not yet formed a team of physicians to provide the service, and the savings were small.

To Sussman, who has held the anesthesia contract since 1988, the Sprague episode has become a matter of honor, not money.

“I’ve heard innuendoes at social events, people sneering at me,” Sussman said. “It just gets annoying.”

And from Sussman’s perspective, that’s unfair.

“In 1988, Dr. Sprague was part of my group, but he specifically told me he didn’t want any part of this place anymore. He didn’t want any nights.”

Sussman said he did make good money off the county contract at first. He received a higher fee for each patient then and could collect more from patients as well. But the county has cut his contract repeatedly since then.

“I’m making half to 60% of what the guys in my specialty are making down the street,” he said.

The county paid Sussman’s group $1.18 million in 1998. That provided the equivalent of 6 1/2 full-time anesthesiologists, he said.

The Medical Economics survey reports that the typical anesthesiologist nationwide nets about $200,000 a year; that figure drops to $187,000 in the West. That appears to be in line with Sussman’s contract.

Sussman said county officials know he took a risk when leaving private practice in Ventura, where the feud between the county hospital and Community Memorial has skewed administrators’ perceptions of loyalty. The rivalry has spurred competition for patients and made rivals of old friends.

“I’ve lost my ability to work at Community,” Sussman said.

To Ashby, who trained under Sprague decades ago, the choice of Sussman over Sprague was one of stability over uncertainty.

“I would truly do anything I could to help Lee Sprague,” Ashby said. “Except he wanted me to throw away our existing system, which was working. I couldn’t do that.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Ventura County Medical Center’s Top 50 Contractors Company/individual name: Las Islas Family Medical Group/Dr. Miguel Cervantes

Specialty: Clinic

Location: Oxnard

‘98 payments: $1,953,228

*

Company/individual name: Landon Pediatric Foundation/Dr. Christopher Landon

Specialty: Clinics

Location: Ventura

‘98 payments: $1,374,308

*

Company/individual name: Dr. Joan Baumer*

Specialty: Clinics

Location: Ventura, Simi Valley

‘98 payments: $1,323,866

*

Company/individual name: MNS Medical Associates/Dr. Mark Sussman*

Specialty: Anesthesia

Location: Ventura

‘98 payments: $1,177,239

*

Company/individual name: Dr. Connell Davis*

Specialty: Clinic

Location: Santa Paula

‘98 payments: $1,151,961

*

Company/individual name: VCMC Orthopedic Medical Group/Dr. Mark Robinson

Specialty: Orthopedics

Location: Ventura

‘98 payments: $1,080,066

*

Company/individual name: Ob-Gyn Group/Dr. Robert Lefkowitz*

Specialty: Obstetrics

Location: Ventura

‘98 payments: $1,074,726

*

Company/individual name: Tower Surgical Group/Dr. James Holden*

Specialty: General surgery

Location: Ventura

‘98 payments: $1,060,870

*

Company/individual name: Seaside Emergency Associates/Dr. David Chase*

Specialty: Emergency medicine

Location: Ventura

‘98 payments: $1,030,749

*

Company/individual name: West Ventura Family Care/Dr. Robert Gonzalez*

Specialty: Clinic

Location: Ventura

‘98 payments: $903,063

*

Company/individual name: VCMC Family Practice Medical/Dr. Lanyard Dial*

Specialty: Education/familypractice

Location: Ventura

‘98 payments: $830,297

*

Company/individual name: Ventura County Neonatal Service/Dr. David Kasting*

Specialty: Neonatal medical group

Location: Ventura

‘98 payments: $800,392

*

Company/individual name: Family Health Center of Moorpark/Dr. Thomas Kozak*

Specialty: Clinic

Location: Moorpark

‘98 payments: $665,429

*

Company/individual name: Magnolia Family Health Center/Dr. Robert Lefkowitz*

Specialty: Clinic

Location: Oxnard

‘98 payments: $619,273

*

Company/individual name: Sierra Vista Family Care Inc./Dr. Brooks Michaels*

Specialty: Clinic

Location: Simi Valley

‘98 payments: $557,273

*

Company/individual name: Circle of Small Medical Organ./Dr. Christopher Landon*

Specialty: Clinic

Location: ThousandOaks

‘98 payments: $498,190

*

Company/individual name: Ventura County Cardiology/Dr. Daniel Clark*

Specialty: Cardiology

Location: Ventura

‘98 payments: $487,500

*

Company/individual name: Dr. William Speitel*

Specialty: Family practice

Location: Ventura

‘98 payments: $392,573

*

Company/individual name: Community Memorial Hospital*

Specialty: Hospital services

Location: Ventura

‘98 payments: $304,970

*

Company/individual name: Cabrillo Radiation Center/Dr. Thomas Fogel*

Specialty: Radiology

Location: Ventura

‘98 payments: $274,624

*

Company/individual name: Dr. Reed Horwitz

Specialty: Radiology

Location: Ventura

‘98 payments: $261,046

*

Company/individual name: Dr. Anita Bajaj

Specialty: Radiology

Location: Newbury Park

‘98 payments: $258,811

*

Company/individual name: Dr. Robert McMahan

Specialty: Radiology

Location: Ojai

‘98 payments: $258,152

*

Company/individual name: C.S. & J. Pathology Medical Group/Dr. Robert James

Specialty: Pathology

Location: Ventura

‘98 payments: $236,171

*

Company/individual name: Ventura Ear, Nose & Throat Medical Group/Dr. John Edison

Specialty: nose*, throat

Location: Ventura

‘98 payments: $214,263

*

Company/individual name: Dr. Paul Silverman

Specialty: Urology

Location: Ventura

‘98 payments: $200,000

*

Company/individual name: Dr. Robert Gonzalez

Specialty: County Clinics med. dir.

Location: Ventura

‘98 payments: $190,063

*

Company/individual name: Dr. Farooq Ali

Specialty: Pathology

Location: Santa Paula

‘98 payments: $189,592

*

Company/individual name: Dr. Richard Ashby

Specialty: VCMC med. dir.

Location: Ventura

‘98 payments: $186,495

*

Company/individual name: Dr. James Herman

Specialty: Neurosurgery

Location: Ventura

‘98 payments: $181,277

*

Company/individual name: Conejo Valley Care Center/Dr. Paulo Carvalho*

Specialty: Clinic

Location: Thousand Oaks

‘98 payments: $179,774

*

Company/individual name: Ventura Coast Imaging Center*

Specialty: Radiology

Location: Ventura

‘98 payments: $175,744

*

Company/individual name: Dr. John G. Prichard

Specialty: Internal medicine

Location: Ventura

‘98 payments: $174,999

*

Company/individual name: Dr. Newton Friedman

Specialty: Ultrasound, echoes/vascular

Location: Ventura

‘98 payments: $170,395

*

Company/individual name: Dr. Gretchen Jacobson

Specialty: Neurosurgeon

Location: Ventura

‘98 payments: $135,656

*

Company/individual name: Dr. John Stauffer*

Specialty: Nuclear medicine

Location: Ventura

‘98 payments: $106,744

*

Company/individual name: Dr. Gail Simpson

Specialty: Internal medicine

Location: Ventura

‘98 payments: $100,750

*

Company/individual name: Dr. John Davidson

Specialty: Pediatric ophthalmologist

Location: Ventura

‘98 payments: $96,113

*

Company/individual name: Dr. Charles Menz

Specialty: Gastroenterology

Location: Ventura

‘98 payments: $82,355

*

Company/individual name: Dr. Stephen Covington

Specialty: Gastroenterology

Location: Ventura

‘98 payments: $82,355

*

Company/individual name: Dr. James L. Holden

Specialty: General surgery

Location: Ventura

‘98 payments: $81,250

*

Company/individual name: Dr. Melanie Gero

Specialty: Pathology

Location: Westlake

‘98 payments: $81,250

*

Company/individual name: Dr. Christine Dahlin

Specialty: Internal medicine

Location: Ventura

‘98 payments: $78,336

*

Company/individual name: Dr. Michael C. Brinkenhoff

Specialty: Ophthalmology

Location: Ventura

‘98 payments: $63,610

*

Company/individual name: Miramar Eye Specialists*

Specialty: Ophthalmology

Location: Ventura

‘98 payments: $63,105

*

Company/individual name: Dr. Peter Gaal

Specialty: Thoracic, vascular

Location: Ventura

‘98 payments: $57,000

*

Company/individual name: Dr. Witold Niesluchowski

Specialty: Vascular surgeon

Location: Camarillo

‘98 payments: $57,000

*

Company/individual name: Dr. Timothy Sheehy

Specialty: Neurology

Location: Ventura

‘98 payments: $54,371

*

Company/individual name: Ventura Neurosurgical Medical Group

Specialty: Neurosurgery

Location: Ventura

‘98 payments: $52,000

*

Company/individual name: Ventura Pulmonary & Critical Care

Specialty: Pulmonary diseases

Location: Ventura

‘98 payments: $51,771

*

* Contract comprises two or more physicians.

*

SOURCE: Ventura County Health Care Agency