Doctors unite to call own shots Large physician groups want again to control rights ceded to insurers

April 21, 1996|By M. William Salganik | M. William Salganik,SUN STAFF

Now, doctors are trying to manage managed care.

There's a rush to assemble large groups of doctors, especially primary care physicians, to negotiate effectively for managed-care insurance contracts. Hospitals are buying medical practices, and so are publicly traded national firms.

But a hot trend -- in the Baltimore area and elsewhere -- is for doctors themselves to organize groups, paying cash or stock to bring new practices into the fold.

Driving the scramble to form new doctor organizations is the rapidly changing health care market.

The growth of HMOs and other managed-care plans has squeezed reimbursement rates and imposed guidelines on system use, leaving doctors feeling they are losing control over their practices. And they're moving quickly to do something about it.

"There's a feeding frenzy out there. All the physicians that have a good practice have been approached. The feeling is that this is the time to act," says Dr. Kenneth Williams, an internist with offices in Highlandtown and Catonsville. On April 1, he became part of the trend, merging his practice into Maryland Personal Physicians.

"It's a shame," Dr. Williams continued. "It used to be that in the hospital cafeterias, we would talk about disease entities. Now, we talk about business entities."

In some ways, Ken Williams is an old-time doc.

His practice is in primary care. His Highlandtown office is in the neighborhood where he grew up and where he still lives, and the waiting room has murals of Baltimore scenes. His Catonsville office is not far from St. Agnes Hospital, where he trained.

His receptionist is his mother. His brother's wife also works in the office. So does the brother's wife's sister. One of his medical partners is the brother of a former patient. "This is true family practice," he jokes.

While clinging to elements of the past, however, he's also struggling to keep up in a business that has changed utterly in the nine years he's been in practice. He has had to become somewhat entrepreneurial. His Highlandtown office could be called a storefront -- it used to be a video store -- but it's a large one, and he rents space to a variety of specialists.

Now that he has merged his practice into Maryland Personal Physicians Inc. (MPPI), he is looking forward to helping run a company he hopes eventually will include 100 to 200 doctors and manage risk contracts on thousands -- perhaps hundreds of thousands -- of patients. MPPI is just one of the doctor-owned groups launched recently -- and which expects to double or triple in size in the next year.

"The level of activity is increasing," says Michael C. Tooke, president and CEO of HelixCare. "More and more parties are entering the competition. From our standpoint, we've seen the competitive urgency."

Although financed by the five-hospital Helix system, HelixCare is a physician group that will be 65 percent doctor-owned when it is fully developed.

Indeed, in the past six months alone, the Baltimore area has seen a number of significant developments:

Flagship Health, formed by 70 doctors with strong Hopkins ties, announced its creation in March. Although it won't begin official operations for a few months, there already is a list of doctors waiting to join, according to Dr. Dana Frank, chairman and CEO.

MPPI officially began operations in November with 53 primary-care physicians; the total is now up to 63, about two-thirds of them equity partners.

Doctors Health System, the largest doctor-run organization in the area, doubled its number of doctor-owners by adding 49 primary-care doctors as equity owners in the first two months of the year alone. And then it increased the pace, with enough agreements and letters of intent to double the number of doctors again. In March, DHS became the first of the local groups to file a stock registration statement with the Securities and Exchange Commission.

Several doctor-owned groups signed Medicare health maintenance organization (HMO) contracts with Blue Cross and Blue Shield of Maryland in February, showing that the doctor groups are beginning to sign the type of insurance contracts they were created to negotiate.

While there is much similar activity nationally -- the American Medical Association recently launched a project to link physician groups with venture capitalists -- Baltimore is in the forefront, according to Gail Harris, an AMA staff attorney who has participated in the association's studies of physician-owned groups.

"We're seeing physician-run groups in response to what's happening in the market," said Ms. Harris. "Since we didn't have health reform, the market is reforming itself, and physicians are concerned with nonclinicians making decisions."

To survive in the managed-care market, physicians feel they need a group large enough to have negotiating power, to hire business expertise and to build the capital needed for "infrastructure," particularly computer systems.

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