Financial Squeeze: Low Medicaid pay has Dallas clinics turning to midlevels to cut costs
By Sean Price Texas Medicine September 2018


April 17 started off badly for pediatricians at the 17 Children’s Health Pediatric Group clinics in the Dallas area. 

“Our practice managers received a message that there was going to be an all-clinic, all-staff (electronic) meeting, which is a very rare thing,” said one pediatrician, who wishes to remain anonymous. “We were actually instructed to close the clinic after the meeting, which never really happens.”

On that ominous note, physicians and other staff gathered that afternoon to find out that MD Medical Group, a Los Colinas-based chain of medical clinics, would be taking over 13 clinics from Children’s Health, one of the leading providers of pediatric services in North Texas. One of the 17 clinics would remain with Children’s Health, and three others would shut down entirely. 

None of the nonphysician staff would lose their jobs. But over the next two days, 27 doctors at Children’s Health found out they would be laid off as of June 2. 

The layoffs are worrisome for both professional and patient care reasons, said several former Children’s Health pediatricians who spoke with Texas Medicine anonymously. Despite severance pay (the acceptance of which included legal bars on speaking about the situation, and thus their anonymity in this story), many of the doctors are unsure of their future employment prospects. They must comply with restrictive non-compete agreements, and setting up their own practices can be expensive and time-consuming. 

The physicians are worried, too, about the impact on patients, most of whom are poor and rely on Medicaid for health insurance.

Turning over clinic operations from nonprofit Children’s Health to the for-profit MD Medical Group, the doctors say, could mean fewer resources and a dwindling number of health care options for these already underserved patients. The Texas Medical Association’s 2016 Physician Survey found 38 percent of Texas physicians accept no new Medicaid patients, while 21 percent limit such patients, largely because of low payments. 

More specifically, the physicians are concerned patient care will fall more to mid-level health care providers like advance practice registered nurses (APRNs) and physician assistants (PAs). They point out that while 27 doctors were fired, no nurse practitioners were directly let go. Other doctors were given lower pay and other conditions of employment that they found unacceptable, causing them to leave. 

“Personally, I’m sure I will be fine,” said one of the pediatricians. “But this trend is very disturbing for the long term. And it’s also disturbing when you’re talking about true quality of care for our patients.”

MD Medical Group CEO Alvaro Saenz says the decision to let go of so many physicians was not taken lightly, but the clinics were not financially sustainable operating as they were. Medicaid payment rates simply are too low to pay salaries for the number of pediatricians Children’s Health had employed — precisely why Children’s Health decided to partner with his organization, he says. 

“What good are we to the people we serve if we can’t even keep our doors open?” Mr. Saenz said. “The decision between [keeping] pediatricians and mid-levels really comes down to an economic one. If Medicaid rates were different, I’d love to keep pediatricians everywhere.”

Children’s Health declined to comment for this story. 

An economic decision

Children’s Health and MD Medical Group might seem like unlikely partners. Children’s Health is one of North Texas’ and the nation’s largest non-profit hospital and clinic systems that specializes in pediatric services. Its network includes the flagship hospital Children’s Medical Center Dallas as well as Children’s Medical Center Plano. The 17 clinics in the Children’s Health Pediatric Group handled more than 181,000 patient visits per year. 

Before partnering with Children’s Health, MD Medical Group, a private company, ran 38 clinics in the Dallas-Fort Worth and Houston areas. Those clinics, which primarily serve Hispanic patients, operate under the names MD Kids Pediatrics and Clinicas Mi Doctor. 

Negotiations between the two organizations began about a year before April’s announcement, Mr. Saenz says. The latest agreement gives Children’s Health a financial stake in MD Medical Group. All specifics of the deal have been kept confidential.

“Essentially, they become minority owners of our organization,” he said.

One of the fired physicians says there had been talk for months that Children’s Health Pediatric Group clinics were not making money. Nevertheless, all the physicians Texas Medicine contacted say the agreement and the layoffs took people by surprise.

“We saw ourselves retiring from here,” one pediatrician said. “We never imagined this could happen.”

The physicians say the biggest sign that Children’s Health had financial problems came late last year when it said that, starting in January 2018, physicians would have to ramp up their daily patient visits from 16 to 24 to improve billing. All of the physicians say the volume increase was accomplished with no problems, though one says it was difficult.

“It’s a struggle when you work with lower-income people and Medicaid patients and people who have limited access to transportation, or [who] just don’t have a mindset of being seen in that way,” the pediatrician said. “Even in the middle of January, in the middle of flu season, we were having to double-book and triple-book, and book 30-some kids on the schedule with the hope of 24 patients per day showing up. And that is all comers — medically complex, [attention deficit hyperactivity disorder], asthma, teen [well-checks] — stuff we know typically takes longer still was getting booked as a 15-minute slot to try to do that.”

This type of case load will be even more difficult now that the clinics will rely more on its APRNs to see patients, the pediatrician says. Many of these mid-levels will not have the training or experience to deal with so many cases day-in, day-out, especially with fewer physicians to supervise them. 

Rules of delegation

Texas has complicated laws surrounding physician delegation. 

Chiefly, the duties a physician can delegate greatly depend “upon the education and experience of the person to whom the acts are being delegated,” states a 2017 TMA whitepaper that summarizes various requirements. (See “Delegation of Duties by a Physician to a Nonphysician,” 

When it comes to delegating prescriptive authority, for instance, Texas law limits physicians to overseeing no more than a total of seven APRNs and PAs, with some exceptions in medically underserved communities and hospital situations. And supervising physicians generally take on some legal responsibility for delegated care. 

“Physicians may delegate but they must supervise because, ultimately, physicians are accountable,” said Dan Finch, TMA’s director of legislative affairs. 

While MD Medical Group relies more heavily on mid-levels than Children’s Health, it does not stock its clinics with them at the expense of physicians, Mr. Saenz says. The company’s current ratio is about 1.3 mid-levels to each physician. He says just because the company laid off physicians does not mean it its relying on mid-levels to provide care.

“This is an effort to say, ‘They’re run by mid-levels,’ and it just isn’t true,” he said. “It doesn’t correlate with reality.”

However, the ratio of physicians to mid-levels is not the most relevant metric, Mr. Saenz says. More important are the level of health care access provided to the community and high quality outcomes, and MD Medical Group achieves both, he says. Mr. Saenz points to the company’s high medical loss ratio, or proportion of Medicaid money spent on patient care versus administrative costs. Amerigroup, MD Medical Group’s largest Medicaid payer, found the company had a 77.5 percent ratio, the highest among comparable health care providers in Texas, he says.

“You don’t get to this by luck, but by the work of care teams that include physicians, mid-levels, and engineers who analyze data continuously to find ways to improve processes and patient results,” Mr. Saenz said. 

A team-based approach

Colleen Kraft, MD, president of the American Academy of Pediatrics, says physicians are rightly concerned about the increasing reliance on APRNs and PAs. She says her organization, like TMA, strongly favors a team-based approach, despite a growing drumbeat of anecdotes about mid-level providers being used to replace physicians in order to cut costs.

 “This is going to be a huge issue [in the future] because of Medicaid payment rates for physician services,” she said. “More physicians are becoming employed rather than working in private practice. If revenues in Medicaid are decreasing, corporate suites will look to hire [nonphysician] providers at a lower salary as the way to cut costs.” 

Other pediatricians say the growing reliance on mid-levels is part of a faulty approach to serving Medicaid patients. Sogol Pahlavan, MD, a pediatrician who owns and runs ABC Pediatric Clinic in Houston, says the best to way maintain access to care for Medicaid patients is through small independent practices like hers, not through chains of clinics. Most of her patients are on Medicaid, and she says her clinic is successful because she’s both a physician and the managing partner, so she can see what works and what doesn’t. 

“[The argument that] payments from the government are low, we can’t survive on those payments, so we have to hire mid-levels — that’s not true,” Dr. Pahlavan said. “We are a group of five pediatricians and two nurse practitioners. We function as a team providing team-based care. I’m profitable. I’m not banking in the millions, but I’m not starving. I’m giving back to the community, and I’m making a decent amount of money to live.”

As this story went to press, the physicians who spoke with Texas Medicine were still searching for work. Some were starting the laborious process of setting up their own practices. (See “Starting a Practice,” left page.) The Dallas County Medical Society, Collin-Fannin County Medical Society, and TMA planned a practice transition seminar for late August to help this group of Children’s Health doctors with legal and practice management basics. 

Other former Children’s Health physicians were looking for work at area practices and clinics. They all had nagging doubts about the patients they left behind. 

“I told a lot of [patients], and a few of them cried tears, and one of them said, ‘You don’t even know the impact you’ve had in our lives,’’ one of the pediatricians said. “We’re talking about single moms — our most vulnerable population. … The role of these clinics was to take care of these Medicaid patients.”


Learn More


  • Texas has complicated laws surrounding physician delegation. TMA’s whitepaper, “Delegation of Duties by a Physician to a Nonphysician,” (, can help you navigate the maze.
  • Understand your legal rights as an employed physician by visiting



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Tex Med. 2018;114(9):22-27
September 2018 Texas Medicine Contents
Texas Medicine Main Page

Last Updated On

September 14, 2018

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Sean Price


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Sean Price is a reporter for Texas Medicine and Texas Medicine Today. He grew up in Fort Worth and graduated from the University of Texas at Austin. He's worked as an award-winning writer and editor for a variety of national magazine, book, and website publishers in New York and Washington. He's also helped produce Texas-based marketing campaigns designed to promote public health. Sean lives in Austin and enjoys hiking, photography, and spending time with his wife and two sons.

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