Doctors forge a care alliance The area's largest physician controlled health system

June 14, 1996|By Mark Guidera | Mark Guidera,SUN STAFF Sun staff writer M. William Salganik contributed to this article.

Doctors Health System, a large physician controlled health system based in Owings Mills, and Medtrust Medical Group, a similar group based in Fairfax, Va., have formed an alliance creating the largest regional doctor controlled health system in the Baltimore-Washington area, setting the stage for a push into other states.

The deal has created a health system with more than 475 primary care physicians and obstetricians that is run by doctors, opposed to systems managed by hospitals or corporations.

Doctors Health has about 350 primary care doctors in its network, which includes the Baltimore region, Montgomery County and parts of Western Maryland. Medtrust has about 125 primary physicians in a network that includes about six counties in Northern Virginia.

The number of primary care physicians a network offers is crucial because they are the physicians who many managed care and other health care organizations require patients to see before any advanced course of treatment by specialists is allowed.

"This is only the beginning of putting together the holy grail of health care -- a regional health-delivery system," said Dr. Norman A. Marcus, chief executive officer of Medtrust, which was formed about two years ago.

"We have every intention of moving into other states and creating one of the nation's first truly doctor controlled regional health systems," said Marcus.

He said the new allies -- each of which will retain their names -- plan to form other alliances or mergers with physicians groups in the near future. Targets include Southern and Western Virginia, West Virginia, Delaware, lower Pennsylvania and Maryland's Eastern Shore.

Dr. Scott Rifkin, founder of Doctors Health, said he was barred from commenting on the deal by Securities and Exchange Commission regulations because his company has filed a stock registration statement with the SEC.

But in the past, Rifkin has expressed a strong interest in structuring agreements with managed care providers that reimburse Doctors Health on a capitated, or set fee, basis for each patient being served.

He calls this "global capitation."

By merging and creating a large pool of primary care physicians and specialists, the two doctors groups would gain greater leverage to strike such agreements and gain a larger pool of patients to spread the capitated fee risk.

Marcus, an orthopedic surgeon, said the deal with Doctors Health was struck in just six weeks, far less time than such deals usually take.

The alliance, he said, will benefit Medtrust because it will gain access to Doctors Health System's capital for future growth and its sophisticated computer information systems for tracking, collecting and accessing patient and physician data.

"We could not hope to grow and prosper without the kind of capital they have, and it would be a very expensive venture to build the type of information system they have in place," said Marcus, who is not barred from commenting by the SEC because Medtrust is not part of the stock registration that Doctors Health filed.

Marcus said one of the hoped-for outcomes of the alliance with Doctors Health would be lifting the burden of bureaucracy from the groups' primary care physicians, while giving them greater ability to "earn a fair profit."

For Doctors Health, which has seen fast-paced growth in the state during the past several months, the alliance gives it a wider geographic market penetration and a much larger physician and patient base.

Those assets should help it at the bargaining table when negotiating reimbursement agreements from managed care groups and other health providers that need a pool of physicians to provide services to their customers, such as large employers.

Also driving the alliance is a larger force: the fast-changing health care market in which HMOs and other managed care plans have squeezed reimbursement rates to doctors and imposed guidelines on the timing and types of care doctors can order for patients.

By banding together and creating a regional system of doctors, the two groups should gain an advantage in negotiating more profitable contracts with insurers, hospitals and managed care companies to provide physician services, and probably gain greater say in how their patients' care is managed, said Dr. Jonathan Weiner, professor of health policy and management at the Johns Hopkins School of Public Health.

"Physicians, particularly in this area, where you have one of the highest concentrations of doctors in the country, are increasingly anxious to become part of these physician-controlled groups," said Weiner.

"They see it as an opportunity to maintain and increase the level of quality and control of their patients' care. But a lot of what's driving it also is coming from the business side."

In the past seven months, the Baltimore area has seen a number of significant health care organizations formed by doctors including Flagship Health, formed by 70 doctors with ties to Hopkins, and Maryland Personal Physicians Inc. (MPPI), which has more than 63 physician members.

Pub Date: 6/14/96

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